Why Balanced Funds Outperformed - And Why The Story Changes Now? Expert Explains

Balanced funds came into focus nearly 12–18 months ago, when valuations looked frothy and investors with moderate risk profiles needed stability. These funds, with their strong tilt toward large-cap equities and high-quality debt, were well-positioned for the interest-rate cycle. As expected, falling rates, liquidity infusion and a CRR cut led to a sharp decline of nearly 125 bps in yields, boosting bond prices and helping balanced funds outperform. However, the story has now changed. With limited upside left in debt markets, experts believe the next phase belongs to equity. Investors should stay invested for the long term, choosing large-cap, multi-cap or even small-cap exposure depending on their risk appetite and time horizon.