We are in a never-seen-before chaos, not just in personal life but also the equity markets. The benchmark indices are down over 30% just within the last one month due to the spike in coronavirus cases.

But I believe that it has provided a great opportunity to invest for the long term. My observation suggests that after every deep slump markets bounce back sharply.

As many stocks have corrected sharply due to the mayhem in the market, valuation wise, they are placed attractively now. This makes it an opportune time to invest in equity mutual funds that follow a value style of investing.

Parag Parikh Long Term Equity Fund (PPLTEF) is one such fund under the multicap category that has rewarded investors in the past through its focus on value style of investing.

Graph 1: Growth of Rs 10,000 if invested in Parag Parikh Long Term Equity Fund 5 years ago

Graph 1

Data as on April 08, 2020
(Source: ACE MF)

PPLTEF’s superior performance over the last five years has helped generate significant lead over the benchmark. If you had invested Rs 10,000 in PPLTEF five years ago on April 8, 2015, it would have grown to Rs 13,696 now (as calculated on April 8, 2020). This translates into a compounded annualised growth rate of 6.5% which over 5 percentage points CAGR higher than its benchmark Nifty 500 – TRI. Despite following cautious investment strategy, PPLTEF has generated substantial alpha over its benchmark. It has done well to curb the downside during the ongoing corrective phase.

Table: Parag Parikh Long Term Equity Fund’s performance vis-a-vis category peers

Scheme Name Corpus (Cr.) 1 Year (%) 2 Year (%) 3 Year (%) 5 Year (%) 7 Year (%) Std Dev Sharpe
Canara Rob Equity Diver Fund 1,601 7.85 7.88 13.27 9.76 12.54 17.60 -0.01
JM Multicap Fund 128 8.79 4.79 12.82 12.19 15.32 18.29 -0.05
Edelweiss Multi-Cap Fund 545 4.10 5.46 12.76 7.00 NA 19.26 -0.04
Kotak Standard Multicap Fund 22,871 7.59 6.32 12.61 13.35 16.16 19.31 -0.07
Parag Parikh Long Term Equity Fund 2,448 6.92 8.37 12.55 12.10 NA 15.46 -0.02
DSP Equity Fund 3,523 10.33 6.01 12.07 10.78 14.10 20.05 -0.03
SBI Magnum Multicap Fund 8,494 6.30 4.87 11.12 13.12 15.39 18.98 -0.08
UTI Equity Fund 10,499 4.52 7.83 10.92 9.81 13.48 18.66 -0.03
HDFC Equity Fund 16,042 4.37 3.85 10.74 8.81 11.75 21.98 -0.10
Motilal Oswal Multicap 35 Fund 12,372 2.06 1.25 10.64 14.58 NA 19.85 -0.10
NIFTY 500 – TRI 2.62 3.85 10.33 8.91 11.07 19.63 -0.09

Returns are on a rolling basis and in %, calculated using Direct Plan – Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on April 08, 2020
(Source: ACE MF)

*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

PPLTEF has generated substantial lead over the benchmark and category average across rolling time periods. Over the longer time horizon of a 5-year rolling period, PPLTEF outperformed the category average and benchmark by over 2.5-3 percentage points. Its performance over the shorter time horizon is impressive as well.

Some of the other top performers in the category include Canara Robeco Equity Diversified FundKotak Standard Multicap Fund, and DSP Equity Fund.

With a standard deviation of 15.46, PPLTEF’s volatility is lowest in the category and far lower as compared to the benchmark. Moreover, its risk-adjusted return is one of the best in the category.

Investment strategy of Parag Parikh Long Term Equity Fund

PPLTE is categorised as a multicap fund. While the fund follows a multi-cap strategy, its orientation remains towards value style of investing where it aims to invest in quality stocks available at reasonable or attractive valuations. What differentiates PPLTEF from the rest is that it does not limit the portfolio to only domestic equities; the fund invests nearly one-third of its corpus in stocks of offshore companies.

However, an average of 65% of its corpus needs to be invested in listed Indian equities, in order to benefit from the favourable Capital Gains tax treatment accorded to equity schemes.

The fund follows an active investment strategy primarily based on a fundamental research-driven bottom-up stock selection approach. It focuses on key parameters like growth opportunities, sustainable competitive advantage, industry structure, margins, quality of the management, and protection of minority shareholders to pick stocks. PPLTEF makes its investments with a long term perspective and follows a buy and hold investment strategy, to realize the full potential of the stocks.

Graph 2: Top portfolio holdings in Parag Parikh Long Term Equity Fund

Holding in (%) as on March 31, 2020
(Source: ACE MF)

PPLTEF’s investment universe is not restricted to any sector, market capitalisation or geography. Overseas equities like Alphabet Inc. and Amazon.com form the fund’s biggest holding with allocation of around 9.3% each. Among domestic equities it has the highest allocation to HDFC Bank of 9.3%, followed by Bajaj Holdings & investment, Mphasis, Hero MotoCorp, ITC, ICICI Bank, and Persistent Systems.

About 31% of PPLTEF’s portfolio is exposed to offshore equities. Banking and Finance together account for around 28% of its assets, followed by Infotech, Consumption, Pharma, and Auto & Auto Ancillaries.


PPLTEF’s flexibility to invest across market caps, sectors, and geographies enables it to deal with the changing market conditions. Its bet on fundamentally sound undervalued stocks has benefited the fund so far. But the compact portfolio size and exposure to global equities means that some of its prominent holdings may come under pressure during uncertainties in domestic or global markets such as the one we are seeing now and have a negative impact on its performance. Value-investment as a strategy requires patience to realise the full potential of stocks. This makes it suitable for investors having moderately high-risk appetite and a longer investment horizon of at least five years.

Note:   This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

This article first appeared on PersonalFN here

Leave a Reply

Your email address will not be published. Required fields are marked *