When the equity markets was expected to go through a prolonged bear phase amid the pandemic’s impact on the economy, investors witnessed a dramatic turnaround as the markets reached all-time highs. The steady rise in equity market has been backed by vaccine hopes, improvement in consumer sentiments, government stimulus, among other factors.

Market movement is difficult to predict, even for seasoned investors. Therefore, the advice on whether to sit on cash, invest heavily, or book profits should be made based on careful evaluation of your financial needs rather than on current market sentiments.

Therefore, it is advisable to invest according to your risk appetite, financial goals, and investment horizon and hold on to it through market ups and downs. If you are an investor with moderate risk appetite investment in large-cap oriented funds could be best suited for your needs.

Mirae Asset Large Cap Fund (MALCF) is a popular scheme in the large cap category that has a track record of delivering superior performance over longer time periods.

Graph 1: Growth of Rs 10,000 if invested in Mirae Asset Large Cap Fund 5 years ago

Graph 1

Data as on November 25, 2020
(Source: ACE MF) 

Launched in April 2008, MALCF has rewarded its investors well despite undergoing multiple changes in its investment mandate. Popularly known as Mirae Asset India Opportunities Fund, the scheme was earlier classified under Multi Cap Funds category and named as Mirae Asset India Equity Fund. However, in May 2019, the scheme was rechristened as Mirae Asset Large Cap Fund and classified under large cap funds category. The latest change in its mandate has not impacted the core investment style of the fund as it still aims to help investors gain from sector and stock specific opportunities, while its portfolio continues to be biased towards large caps. The prudent investment strategies followed by the fund has earned it a tag of being a consistent performer that has rewarded long-term investors well across market cycles. Over the last 5 years, MALCF has appreciated at a CAGR of 13.4%, as against 11.5% delivered by the current benchmark Nifty 100 – TRI index.

Table: Mirae Asset Large Cap Fund’s performance vis-à-vis category peers

Scheme Name Corpus (Cr.) 1 Year (%) 2 Year (%) 3 Year (%) 5 Year (%) 7 Year (%) Std Dev Sharpe
Axis Bluechip Fund 18,283 12.20 17.61 13.89 14.70 16.31 17.54 0.138
Canara Rob Bluechip Equity Fund 924 16.27 17.63 12.66 14.17 15.31 18.82 0.119
Edelweiss Large Cap Fund 193 10.23 13.31 8.99 11.93 14.33 20.71 0.073
BNP Paribas Large Cap Fund 900 9.28 15.44 8.88 11.18 15.29 18.77 0.070
Mirae Asset Large Cap Fund 18,999 7.31 11.72 7.52 13.53 17.67 21.28 0.054
SBI BlueChip Fund 22,421 8.20 11.39 6.26 10.83 15.64 21.54 0.027
ICICI PruBluechip Fund 23,486 6.12 9.02 5.83 11.24 14.02 20.75 0.023
Aditya Birla SL Frontline Equity Fund 17,274 5.95 8.81 4.65 10.19 13.94 21.29 0.010
HDFC Top 100 Fund 15,922 -2.40 4.39 2.27 9.13 12.39 22.59 -0.019
Nippon India Large Cap Fund 9,677 -3.51 3.16 2.26 8.88 14.39 23.63 -0.011
Nifty 100 – TRI 7.40 10.98 7.56 11.63 13.02 21.36 0.049

Returns are point to point and in %, calculated using Direct Plan – Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on November 25, 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.

MALCF has been one of the top quartile performers across various time periods in the past. It consistently ranked among the top funds in its previous opportunities style as well as multi-cap funds category, whereas it’s ranking under the current large-cap funds category is healthy as well. Over longer time frame of 5-7 years, the fund has managed to generate a decent alpha of around 2-4 percentage points over the benchmark.

With a Standard Deviation of 21.28, the fund’s volatility has been nearly in line with the benchmark as well as its large cap category peers. Moreover, the Sharpe Ratio of the fund has been among the best in the category and much ahead of its benchmark and many of its peers. Its ability to constantly limit downside and cap losses during market downturn and superior performance during market rallies differentiates it from the rest.

Investment strategy of Mirae Asset Large Cap Fund

From an Opportunities style to a Multi Cap funds category, this scheme has finally taken the next leap to the Large Cap funds category. The recent categorization into large cap funds category didn’t have any major impact on its investment style. MALCF continues with its strategy of following a combination of top down and bottom up approach to stock picking and endeavours to invest in companies which have a chance of benefiting from economic growth and structural changes happening in the country.

The fund has proven its ability to timely identify sector and stock specific opportunities. Aiming to outperform the benchmark, the fund managers follow a rigorous investment process that leads to alpha generation. They look at business on various quantitative and qualitative parameters and give high importance to quality and scalable business run by credible management.

MALCF usually holds a large cap bias with some allocation towards mid cap stocks and invests in a well-diversified portfolio of about 55-65 stocks. The fund holds the tendency to vary its investment strategies depending on the external factors. However, the current large cap mandate may limit its flexibility. The fund resists from following any market momentum and stays fully invested most of the times.

Graph 2: Top portfolio holdings in Mirae Asset Large Cap Fund

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

As of October 31, 2020, MALCF held a well-diversified portfolio of 53 stocks. It held major exposure in highly liquid large cap names like Reliance Industries, HDFC Bank, Infosys, and ICICI Bank together accounting for around 36% of its assets. TCS, Bharti Airtel, Axis Bank, HUL, Maruti Suzuki India, and L&T are among the other top holdings in the fund’s portfolio.

In the last one year, MALCF has benefited from its prominent holdings in stocks like Infosys, Reliance Industries, Divi’s Laboratories, TCS, Torrent Pharma, Dr Reddy’s Laboratories, Balkrishna Industries, etc. that have together contributed around 9% to its returns. Some other stocks like Max Financial Services, Tata Consumer Products, Ajanta Pharma, Info Edge (India) stood among other top gainers in the portfolio.

In terms of sector, the fund’s portfolio is currently skewed towards Banking and Finance stocks (29.5%), followed by Infotech, Petroleum Products, Consumption, Pharma, and Auto together accounting for another 50% of the portfolio. The remaining portion of the fund’s portfolio is diversified across range of sectors like Engineering, Telecom, Consumer Durables, and Power among others.

Suitability

MALCF holds a well-diversified portfolio spread across stocks and sectors that helps it efficiently deal with market fluctuations. This bodes well with the large-cap allocation that further increases the stability of the portfolio. MALCF has a history of performing consistently well across market cycles through timely sector bets. The cyclical bets taken by the fund manager has helped increase the return generated by the fund during economic recoveries, whereas the allocation to defensives helps tackle the volatility and limit downsides.

Its investment approach is centered around participating in high quality businesses upto a reasonable price and holding the same over an extended period of time. This makes MALCF suitable for long term investors with moderate risk appetite.

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


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