We like this fund for its diverse and aggressive large- and mid-cap orientation. The consistent performance makes this fund a compelling pick.
Strategy
The fund manager makes strategic long-term bets due to the 3-year lock-in without compromising on diversification. This fund's portfolio is made of a mix of large- and mid-cap stocks that are carefully chosen after intensive fundamental analysis and research, having potential of long-term capital appreciation and growth. The fund has no restrictions or investment cap when investing in sectors and stocks. It is for this reason that select stock bets can be as high as 10 per cent, which is the case with Bharti Airtel at the moment.
The fund is well invested in all market cycles, to gain from the available three year lock-in with investments. In the past five years, cash holdings has seldom exceeded 10 per cent barring the 24 per cent in 2003. The fund manager maintains a well-diversified portfolio with average 55-60 stocks which is in line with the category.
Performance
From 85-90 per cent allocation in mid- and small-cap in 2006-07, the fund has moved to large- and mid-cap, with almost 70 per cent large-cap allocation at the moment. The higher allocation to large-caps has helped stabilise returns in 2009 and 2010 compared to the pre-2007 phase when returns were volatile. In this phase it also increased its allocation to quality large-cap stocks such as Infosys, ICICI and Reliance Industries, which regularly find over 5 per cent allocation. Likewise, investment in the mid-cap space in stocks such as Orient Paper & Industries, Swelect Energy Systems, Precot Meridian and Cadila Healthcare has helped this fund post good returns.
In 2011, the fund was able to curtail the fall with its aggressive bets in healthcare sector and stocks like Cipla and Divi's Laboratories, which helped cushion the fall. Predominantly sectors such as energy, engineering, financial and healthcare find place in its portfolio accounting for well over 60 per cent, which is less than the near 70 per cent for the category.
Why invest?
A diversified large- and mid-cap tax planning fund makes it a god bet with the three-year lock-in, with average risk and high return prospects. Investors should be cautious of the high turnover ratio of this fund, which could impact the long-term returns.
Happy Investing!!
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