Few days after the S&P BSE Sensex touched the historic milestone of 50,000 points, the equity market has started witnessing selling pressure.
Notably, while the stellar rally seen over the last few months have helped key market indices touch an all-time high, it has been ahead of the fundamentals. Therefore, we can expect the markets to remain volatile in the short term and a further correction cannot be ruled out.
Given the current expensive market valuation, it is important to tread with caution. If you are a conservative investor you may consider shifting investment from highly volatile mid and small cap funds, to their large cap counterparts or other stable asset class.
Large cap funds tend to be more resilient during tough market conditions and have the potential to reward investors with better risk-adjusted returns while maintaining the stability of the portfolio.
Canara Robeco Bluechip Equity Fund (CRBEF) is one such large cap fund that has clearly beaten its giant-sized peers in the recent crash and showcased its high growth potential over the last couple of years.
Graph 1: Growth of Rs 10,000 if invested in Canara Robeco Bluechip Equity Fund 5 years ago
Data as on January 27, 2021
(Source: ACE MF)
CRBEF is a small-sized fund that remained an average performer for a major tenure of its existence. However, the fund has just registered its first ever extra-ordinary phase and even made it to the list of top performers. The fund’s corpus has grown over four times in the last one year due to its superior performance in the last couple of years. Its strategy of sticking to index heavy weights that have been driving the index over the last couple of years has turned in its favour and paid-off investors with superior returns. Over the last 5-year period, CRBEF has registered a compounded annualised return (CAGR) of around 17.4%, as against 14.9% CAGR delivered by its benchmark S&P BSE 100 – TRI index. Clearly, CRBEF’s recent extra-ordinary performance, supported by its ability to manage downside, helped it find a space in the list of top category performers.
Table: Canara Robeco Bluechip 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|
|Axis Bluechip Fund||22,517||18.45||20.07||15.00||17.53||17.51||18.20||0.186|
|Canara Rob Bluechip Equity Fund||1,364||22.67||21.53||14.23||17.34||16.83||19.44||0.170|
|BNP Paribas Large Cap Fund||1,051||16.55||19.11||9.91||14.42||16.85||19.34||0.111|
|Edelweiss Large Cap Fund||223||16.28||16.47||9.73||14.87||15.56||21.28||0.116|
|LIC MF Large Cap Fund||486||12.78||16.41||9.55||13.76||14.04||19.76||0.107|
|Kotak Bluechip Fund||2,067||16.83||18.15||9.30||14.55||16.15||21.83||0.102|
|Mirae Asset Large Cap Fund||22,093||15.68||15.88||8.58||16.64||18.85||21.79||0.094|
|SBI BlueChip Fund||25,925||15.78||16.26||7.81||13.50||16.61||22.44||0.078|
|ICICI Pru Bluechip Fund||26,541||14.59||14.02||7.29||14.52||15.53||21.53||0.075|
|S&P BSE 100 – TRI||16.86||14.62||8.52||14.91||14.25||22.13||0.097|
Returns are point to point and in %, calculated using Direct Plan – Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on January 27, 2021
(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.
CRBEF’s high growth potential is clearly visible in the performance table above. The superior performance registered by the fund over the last year has helped improve its overall returns as well. With this the fund has achieved a mark of significantly outpacing the benchmark and prominent category peers across time periods. Over the 5-year and 7-year period, CRBEF’s performance has been far better than the benchmark, where it has managed to generate an alpha of about 2.5 percentage points.
This outperformance has come at a far reasonable risk when compared to the benchmark and category average. The funds Standard Deviation (19.44%, annualised) is much lower than its benchmark (22.13%) as well as the category average (20.95%). In terms of risk-adjusted returns CRBEF currently ranks among the top performers in the category.
Investment strategy of Canara Robeco Bluechip Equity Fund
Categorised under large cap funds, CRBEF is mandated to invest a minimum 80% of its assets in large-cap stocks. Accordingly, it focuses on bluechip companies and invests in stocks of companies figuring in the list of top 100 companies based on market capitalisation. While selecting stocks for the portfolio, the fund focuses on companies and sectors that are expected to perform better than the general market and uses inputs from internal quant model to identify investable companies. The fund follows a blend style of investing i.e. it looks for high growth stocks available at fair valuation and stays invested for a long term.
While building portfolio, CRBEF follows a 3 Steps investment process designed to achieve the investment objective in a disciplined manner, where step 1 is idea generation from the investment universe, followed by step 2 – screening process to shortlist investible ideas, while finalising the portfolio in the step 3. In the screening process the fund manager gives weightage to competent management, robust business fundamentals and reasonable valuations.
The fund manager aims to invest in large sized companies with an established business presence, good reputation and solid brand equity. CRBEF usually holds about 40-45 stocks in its portfolio and follows a buy and hold investment strategy, which reflects the strong long-term conviction the fund management has when it picks stocks for the portfolio. Notably, the funds turnover ratio has ranged between 45% and 50% in recent months.
Graph 2: Top portfolio holdings in Canara Robeco Bluechip Equity Fund
Holding in (%) as on December 31, 2021
(Source: ACE MF)
CRBEF usually holds a fairly-diversified portfolio of about 40 to 45 stocks. As on December 31, 2020, the fund held 44 stocks in its portfolio spread across sectors. The top 10 stock holdings accounted for about 52.2% of the portfolio. Index heavyweights like HDFC Bank, Infosys, ICICI Bank, Reliance Industries, and HDFC Ltd. currently find place in the top 5 portfolio holdings. Names like TCS, HCL Technologies, Bajaj Finance, Axis Bank, and Bharti Airtel, etc. are among other stocks that have found place in the core holdings of the fund.
CRBEF’s prominent bet on companies like Infosys, Divis Laboratories, Reliance Industries, HDFC Bank, TCS, Gujarat Gas, etc. has turned out to be extremely rewarding for the fund, in the last one year. The gainers in the portfolio have outscored the losers, helping it create significant alpha for investors.
Around one-third of CRBEF’s portfolio is exposed to stocks in the Banking and Finance sector. Infotech, Consumption, Petroleum, Pharma, Auto, and Consumer Durables have been the other prominent sectors in the portfolio with an exposure of about 3% to 15% in each, along with diversification to Telecom, Engineering, Cement, Oil & Gas, Retail, Metals, and Healthcare services.
CRBEF has evolved in terms of performance by distinctly outperforming the benchmark, as well as most of its large-sized peers even in conditions where many of its popular peers struggled with their performance. The fund appears to be well placed in terms of its process driven portfolio management strategies and has the potential to reward investors willing to stay invested in the fund for stable returns in the long run.
Backed by well-defined investment process and risk management techniques, CRBEF has the ability to timely pick quality names having high growth potential, and deliver market-beating returns in the long run at reasonable level of risk. This makes CRBEF suitable for investors looking for stable returns from investment in large caps with a potential to generate decent alpha over the long term.
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