Conventional wisdom suggests that one of the key ingredients for making money is diversifying your portfolio. Romit Mehra, an IT professional from Pune, and Tejas Deshmukh from Lucknow took different approaches to diversification.
When Mehra, 36, started investing five years ago, he put all his savings into the Nippon India Large Cap Fund. The fund performed decently for two years, but when the market turned volatile, so did his portfolio. His returns shrank, and he panicked. A friend advised him to “diversify.”
Mehra began adding every “top-rated” mutual fund he came across, including equity funds, value funds, ELSS, small-cap funds, dividend yield funds, and even thematic funds focused on IT, energy and allied sectors. Within three years, he owned 18 funds across categories. Yet, on checking his returns, Mehra saw he had achieved barely more than what a simple Nifty 50 index fund would have delivered.
His portfolio had a lot of duplication, with multiple funds owning the same top holdings. “I thought more funds meant more safety,” he admits. “But I was essentially buying the same companies Reliance Industries, ICICI Bank, Infosys, and so on just through different funds.” At the time, Mehra owned five large-cap funds, resulting in significant duplication in the underlying holdings. To be sure, large-cap funds must only invest in the 100 largest stocks by market capitalisation.
Unlike many investors, Mehra mistook diversification for variety. Owning many funds isn’t the same as owning different kinds of exposure. When every fund mirrors the same market segment, you’re not diversifying, you’re multiplying paperwork.
The cost of excess
Deshmukh, on the other hand, found safety in numbers. A self-taught investor, the 40-year-old built his portfolio over a decade through systematic investment plans (SIPs) in almost every new fund that came along.
“At one point, I had 28 funds,” he says. “It gave me a sense of security. I felt that if one fails, the others will protect me.” But when the market dipped sharply in 2022, nearly all his funds fell in tandem.
The sense of safety vanished. Upon reviewing his portfolio, he realised he had almost 250 underlying stocks, most of which were repeated across his funds. His overall returns barely beat inflation. A consultation with a financial planner helped him streamline his portfolio, trimming it down to six funds: two flexi caps, one mid cap, a hybrid, a gold exchange-traded fund (ETF), and a short-duration debt fund. “Now, I can finally track them,” says Deshmukh. “And strangely, I’m earning better returns.”
Diversification reduces the impact of one poor performer, but over-diversification minimises the effect of every good one. When your portfolio is spread across too many funds or stocks, no single winner can make a meaningful difference. Deshmukh realised this the hard way. The irony is that in trying to avoid concentration risk, many investors end up creating index-like portfolios with vast overlaps.
Obsession with novelty
The problem is not just in owning too many funds; it’s also in constantly chasing new ones. Each time a new fund offer (NFO) hits the market, investors swarm in, treating it like the next big IPO. It is still not unusual, experts say, to see investors chasing NFOs due to the ‘Rs.10 net asset value (NAV) being cheaper’ rationale.
That mindset is “deeply flawed,” says Feroze Azeez, Joint CEO, Anand Rathi Wealth. “Unlike IPOs (initial public offerings), the NAV of a mutual fund doesn’t reflect its valuation or market sentiment. An NFO priced at Rs.10 offers no inherent advantage over an existing fund with a NAV of Rs.200. The performance will depend entirely on the quality of the underlying portfolio and the fund manager’s skill,” he says. In reality, the higher NAV is mainly due to the fund’s longer existence.
According to Azeez, the NFO mania has intensified in the past couple of years. “In 2024-25, around 244 NFOs were launched, mobilising over Rs.1 trillion in flows. About 85% were equity-oriented, and nearly 60% were sectoral or thematic,” he says. “Investors are increasingly buying into trends, not strategies.”
Diversification through asset class
A different asset class leads the charts every year, making diversification essential to hedge your portfolio against changing market cycles.
Overview
Mumbai’s Economic Offences Wing (EOW) has registered a serious fraud case against Atom Capital Pvt Ltd, Supremus Angel broking firm, and associated directors for allegedly deceiving investors of ₹26.5 crore under the guise of purchasing unlisted shares of the National Stock Exchange (NSE)
Who’s Involved
The FIR names eight individuals and entities, including:
Atom Capital Pvt Ltd – Satish Kumar (Director) and Nisha Kumari R.
Supremus Angel – Krish Vora and Manish Soni (Partners)
Optimus Financial Solutions Pvt Ltd – Sanjay Damani and Neeraj Nisar (Directors)
Complainant Vinay Dinanath Tiwari from Malad East and his clients (including the Dhariwal family) transferred funds under assurance of receiving 1.68 lakh unlisted NSE shares
How the Fraud Unfolded
Between January 13–24, 2025, Tiwari’s firm wired ₹16.5 crore to Atom Capital. In a separate transaction, Prakash Dhariwal’s group paid additional funds via Supremus Angel
The accused presented fabricated share-holding statements and KYC documentation indicating ownership of unlisted NSE shares.
Instead of executing the share transfers, funds were routed through Supremus Angel to Optimus Financial, then siphoned for personal use. No shares were delivered
Legal Ramifications
The FIR, lodged at Worli Police Station and now under EOW Unit 6 jurisdiction, lists charges including criminal conspiracy, cheating, misappropriation, criminal breach of trust, and use of forged documents under the Bharatiya Nyaya Sanhita sections 316(5), 318(4), 61(2), and 3(5). The investigation is ongoing.
Broader Context: Escalating Unlisted Venue Frauds
This case echoes other major cases such as Atum Capital’s claim of ₹115 crore fraud involving 500,000 unlisted NSE shares with Supremus Angel which denies the allegations Across the board, there is increasing scrutiny over misrepresented share sales and forged documentation in unlisted markets, echoing previous incidents like the NSEL crisis
Takeaways for Investors
| Risk | Mitigation |
|---|---|
| Unverified share terms | Ensure transparent documentation and secure custodial verification |
| KYC forgery | Independently verify KYC and shareholding statements via reliable platforms |
| Diversion of funds | Use escrow accounts or Delivery vs Payment (DvP) settlement mechanisms |
| Potential for financial loss & legal dispute | Conduct thorough due diligence; seek legal and financial advice |
This ₹26.5 crore defrauding incident is a stark reminder of the systemic vulnerabilities within unlisted share transactions. It underscores the critical need for investors to demand verified custodial arrangements, escrow services, and legal oversight all pillars that RURASH Financials stands by. Our expertise lies in minimizing these risks and ensuring compliance, transparency, and investor protection every step of the way.
Contact us today to explore secure investment solutions and demat facilitation services that shield you from market-side fraud risks.