After the recent ban on Chinese apps, this is an opportunity for large firms to expand their horizons further. Most large firms offer stability and form a part of the index. Looking at this growth opportunity, Sundaram Mutual Fund launches Sundaram Bluechip Fund, an open-ended scheme that will invest in large cap stocks which are the first 100 companies in terms of full market capitalization.

Despite the recent pandemic, large caps have managed to sustain the shock, as seen from the graph below.

Thus, when you plan for long-term goals, want the stability of large-caps with average return potential with less volatility, if you have the stomach for moderately high risk, you may skew your equity portfolio to a large-cap fund.

Graph: Large caps fare better

Data as on September 16, 2020
(Source: ACEMF; PersonalFN Research)

Sundaram Bluechip Fund will allocate more of its assets to large cap stocks, with a little allocation towards stocks that are not large cap, debt, units of Units issued by ReIts / InvIts and probably overseas securities. Hence this fund being an equity fund has high risk, so it is suitable for investors who are seeking moderate returns at moderately high risk for an investment horizon of 3 to 4 years.

Table 1: Details of Sundaram Bluechip Fund

Type An open-ended equity scheme predominantly investing in large
cap stocks.
Category Largecap Fund
Investment Objective To generate capital appreciation by investing in large cap stocks.
No Guarantee: there is no guarantee or assurance that the investment objective of the scheme will be achieved. Investors are neither being offered any guaranteed / indicated returns nor any guarantee on repayment of capital by the Schemes. There is also no guarantee of capital or return either by the mutual Fund or by the sponsor or by the Asset management Company.
Min. Investment Rs 5,000 and in multiples of Re 1 thereafter Face Value Rs 10 per unit
  • Regular

  • Direct

  • Growth*
  • Dividend
    • Pay-out
    • Reinvestment *
    • Sweep
*Default option
Entry Load Nil Exit Load
  • For redemption/switchout within 12 months from the date of allotment – 1%.

  • For redemption/switchout on or after 12 months from the date of allotment – Nil

Fund Manager
  • Mr Rahul Baijal & Mr S Krishnakumar (Equity)

  • Mr Dwijendra Srivastava (Fixed Income)

  • Mr Rohit Seksaria for in overseas securities

Benchmark Index Nifty 100 TRI Index
Issue Opens 17/09/2020 Issue Closes: 30/09/2020

(Source: Scheme Information Document)

How will the scheme allocate its assets?

Under normal circumstances, it is anticipated that the asset allocation of BLMF will be as follows:

Table 2: SBF ‘s Asset Allocation

Instruments Indicative Allocation (% of Total Assets) Risk Profile
Minimum Maximum
Equity & equity related securities of large cap stocks@ 80 100 High
Other Equity 0 20 High
Investment in overseas securities / ADR’s / GDR’s 0 20 High
Fixed Income and money market Instruments^/ Cash & Cash equivalents 0 20 Low to Medium
Units issued by ReIts / InvIts 0 10 Medium to High

@Large cap stocks are the first 100 companies in terms of full market capitalization. the list of large cap stocks will be computed by AmFI as per SeBI circular dated Oct 6, 2017 and will be made available on its website on a half yearly basis.

Money market Instruments includes Certificate of Deposits, Commercial Papers, t-Bills, Government Securities having an unexpired maturity up to 1 Year, Call or notice money, Commercial Bills, Reverse Repo, tRePS and any other instruments as defined by RBI/SeBI from time to time.

Other equity means other than large cap stocks

  • The scheme shall not invest in securitized debt or in credit default swap.
  • The scheme shall not engage in short selling.
  • The scheme shall engage in securities lending subject a maximum of 20% and 5% for a single counter party.
  • The Scheme shall invest in ADR/GDR/Overseas securities upto 20% of the net assets

(Source: Scheme Information Document)

What will be the Investment Strategy?

The Sundaram Bluechip Fund aims to provide long term capital growth by predominantly investing in a diversified portfolio of large cap stocks. The fund would aim to participate in the all-round growth of the economy. For this, the fund managers will identify suitable stocks that will benefit from economic growth.

The fund may follow a bottom-up approach towards investing/identifying individual stocks and a top-down approach towards investing/identifying sectors so that the resultant portfolio is well diversified.

[Read: Two Approaches To Portfolio Construction Followed By Fund Managers]

The Scheme would invest in companies based on various quantitative and qualitative criteria like sound financials, professional management, track record, industry scenario, industry and company growth prospects etc. The Fund may also invest in overseas equities and ADR’s / GDR’s depending on the Investment manager’s view / analysis.

To reduce the risk of the portfolio, the Scheme may also use various derivative and hedging products from time to time for hedging and rebalancing purposes, in the manner permitted by SEBI. the Scheme retains the flexibility to hold from time to time relatively more concentrated investments in a few sectors or a concentrated portfolio of stocks.

Who will manage Sundaram Balanced Advantage Fund?

The equity portion of the Sundaram Bluechip Fund will be co-managed by Mr Rahul Baijal and Mr Krishnakumar S. Mr Dwijendra Srivastava will manage the Fixed income portion of the scheme and Mr Rohit Seksaria will look in overseas securities of the scheme.

Mr Rahul Baijal has done his Engineering followed by an MBA. He has 25 years of experience in fund management.

Before joining Sundaram Asset Management Company as a Fund Manager of Equity in July 2016, he has worked as a Fund Manager at Bharti AXA Life Insurance for 4 years and at TVF Capital (erstwhile Voyager Capital; India dedicated hedge fund, long- short public equity) as a Director- Portfolio Manager/Investment for 7 years.

Some of the schemes that Mr Rahul manages/co-manages at the fund house include Sundaram Select Focus, Sundaram equity hybrid (equity Portion), Sundaram hybrid Fund Series U (equity Portion), Sundaram Capital Protection Oriented Fund Series 5-7 (equity Portion), Sundaram Services Fund, Sundaram Financial Services Opportunities Fund and Sundaram Debt Oriented hybrid (equity Portion).

Mr Krishnakumar S holds an honorary degree in Engineering (BE) and has done his post-graduation diploma in Business Administration. He has more than 13 years of experience in Equity Research and Fund Management.

He has been associated with Sundaram Asset Management Company Ltd from December 2003 as a Senior Research Analyst. Over the years he has grown to become an integral part of the AMC.

Currently Mr Krishnakumar is the Chief Investment Officer of Equities and manages Sundaram Mid Cap, Sundaram Select Small Cap Series and Sundaram Large and midcap

Some of the other schemes that Mr Krishnakumar co-manages are Sundaram Small Cap, Sundaram mullti Cap Series I-II, Sundaram Diversified equitySundaram Debt Oriented Hybrid Fund, Sundaram World Brand Fund II-III, Sundaram Rural and Consumption FundSundaram Services Fund, Sundaram Select micro Cap Series XI,XII & XIV.

Mr Dwijendra Srivastava joined Sundaram Asset Management Company Ltd as the Chief Investment Officer for Debt Investments. He has done his B. Tech with a specialization in Textile Technology, PGDM in Finance and CFA. He has a work experience of over 12 years in Fixed Income and Fund Management.

Before joining the fund house, he was the Head of Fixed Income at Deutsche Asset Management (India) Ltd, Vice President and Fund Manager at JM Financial Asset Management Ltd and has been associated with the Fund Management Team of Tata Asset Management as the Fund Manager.

Currently at the fund house, some of the schemes which Mr Dwijendra co-manages include; Sundaram Money FundSundaram Low Duration FundSundaram Corporate Bond FundSundaram Medium Term Bond FundSundaram Short Term Debt Fund, Sundaram Capital Protection Oriented Funds, Sundaram Debt Oriented Hybrid Fund, Sundaram Fixed Term Plans, Sundaram Multi cap Series I – II (Debt Portion), Sundaram Short Term Credit Risk FundSundaram Banking & PSU Debt FundSundaram Equity Savings Fund (Debt Portion) and Sundaram Equity Fund (Debt Portion).

Mr Rohit Seksaria, has a bachelor’s degree in commerce (B. Com), a PGDM and is a CFA. He has a work experience of over 12 years in Fund Management and Equity Research. He is a dedicated fund manager for investments in overseas securities.

Mr Rohit is currently an Assistant Fund Manager of Equity at Sundaram Asset Management Company Ltd. Before joining the fund house, he was a Senior Analyst at Progress Capital Pte Ltd, Singapore and Matchpoint Investment Management Asia Ltd, Hong Kong. Prior to that, at Irevna Research Services Ltd he worked as the Head of Research and as a manager at UTI Mutual Fund.

Currently at the fund house, some of the schemes which Mr Rohit jointly manages include, Sundaram Long term micro cap tax advantage Fund Series III to Sundaram Long term  micro cap tax advantage Fund Series VISundaram World Brand Fund Series – II and Sundaram World Brand Fund-IIISundaram Select micro cap Series VIIISundaram Select Micro Cap – Series XII  and Sundaram Select Micro Cap – Series XIV to Sundaram Select Micro Cap – Series XVII Sundaram Services FundSundaram Debt Oriented Hybrid Fund (equity Portion), Sundaram Long term cap tax advantage Fund Series III and Sundaram Long Term Tax Advantage Fund – Series IV Sundaram Emerging Small Cap – Series I  to Sundaram Emerging Small Cap – Series VIISundaram Long Term Tax Advantage Fund – Series III  and Sundaram Long Term Tax Advantage Fund – Series IV.

The outlook for Sundaram Bluechip Fund.

In order to achieve the stated objective of the scheme, the fund managers will actively manage the scheme and construct the portfolio with a bottom-up approach towards investing in stocks and follow a top down approach to identify the sectors.

Hence the performance of the Sundaram Bluechip Fund weighs on portfolio and risk management strategies the fund managers employ.

However, please note that the trailing 12-month P/E of the Nifty 500 and the Nifty 100 large-cap index is above 26.6x versus sub-20x levels at the end of March 2020. Although this reading is low when compared to earlier periods; it would be incorrect to term it cheap. When weighed in context with corporate earnings, valuations, particularly in the large-cap segment, appear expensive.

A point of caution is that India Inc.’s corporate earnings have been significantly impacted by the COVID-19 pandemic. For Q1FY21 and the ensuing few quarters as well, corporate earnings have largely been impacted due to the COVID-19 pandemic. Only a handful of heavyweights of the bellwether index have kind of lived up to street expectations.

The recovery would be slow and painful for most other companies, as India still hasn’t completely unlocked from the lockdown due to increasing COVID-19 cases. It might take a couple of years for complete normalcy to return, and until then the strain on earnings will be visible.

In such a scenario, set realistic post-tax return expectations from your investment portfolio. Don’t get carried away by the earnings trap (where often the near-term estimates are being toned down, while the future earnings estimates are increased).

This article first appeared on PersonalFN here

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