Amid the uncertainty of this pandemic, many investors plan to make investments that offer stability to their investment portfolio. In the event of a crisis, blue chip funds comprising of large cap stocks can provide steady returns as well as better protection from downside risks compared to funds in other market capitalizations.
A blue-chip mutual fund (synonym for large cap fund) is one that invests majorly in large cap stocks, which are well-established companies in their respective fields.
Large-cap companies, typically, have steady cash flows, sustainable market share, and strong balance sheets, which positions them to deal with market volatility in challenging times. In addition, large-cap funds offer investors a diversified portfolio of leading Indian companies across sectors.
The performance of the large-cap segment exhibits that it has managed the downside well in the market fall of 2020 and still going strong. Looking at this trend in the large cap segment, BOI AXA Mutual Fund has launched BOI AXA Bluechip Fund; it is an open-ended equity scheme predominantly investing in large cap stocks.
BOI AXA Mutual Fund is a joint venture of one of India’s largest Public sector bank, Bank of India and the AXA Investment managers group that holds market expertise.
Table 1: Details of BOI AXA Bluechip Fund
|Type||An open-ended equity scheme predominantly investing in large cap stocks.||Category||Large Cap Fund|
|Investment Objective||The investment objective of the scheme is to provide investors with the opportunities long-term capital appreciation by investing predominantly in equity and equity-related instruments of large cap companies. However, there can be no assurance that the income can be generated, regular or otherwise, or the Investment Objective of the scheme will be realized.|
|Min. Investment||Rs 5000/- and in multiples of Re 1 thereafter. Additional purchase Rs 1000/- and in multiples of Re 1 thereafter.||Face Value||Rs 10/- per unit|
|Entry Load||Not Applicable||Exit Load||
|Fund Manager||Mr Dhruv Bhatia||Benchmark Index||Nifty 50 – Total Return Index|
|Issue Opens:||June 08, 2021||Issue Closes:||June 22, 2021|
(Source: Scheme Information Document)
What will the Investment Strategy for BOI AXA Bluechip Fund be?
BOI AXA Bluechip Fund will invest minimum 80% of its assets in equity and equity related instruments of large-cap companies (top 100 companies by market capitalisation) that the fund manager believes have sustainable business models, and potential for capital appreciation.
This scheme will be investing its assets across stocks that represent a broad range of sectors of the economy, in order to ensure adequate portfolio diversification. The Scheme would follow an actively managed approach allowing it the flexibility to pursue opportunities without having any bias in favour of sectoral allocations.
The Fund Manager would follow a top-down approach to shortlist stocks for portfolio construction in line with the process outlined below. Under the top-down process, it would look at the global and Indian economy as well as the domestic policy environment and stock valuations. This would result in identification of themes, which have a potential to outperform.
The final stock selection process would be through the bottom-up process wherein stocks from the shortlisted themes would be picked up based on valuations. For asset allocation, the Fund Manager would take the help of qualitative framework of MVPS (Macro, Valuation, Policy and Sentiment).
This scheme apart from investing minimum 80% of its assets in equity & equity related instruments of large cap companies may invest up to 20% in equity & equity related instruments of mid & small cap companies. The scheme also has flexibility to invest up to 20% in debt including corporate debt and money market instruments and up to 10% in units issued by REITs and InvITs.
About the benchmark
The NIFTY 50 index is a well-diversified index of 50 companies reflecting overall market conditions. NIFTY 50 Index is computed using free float market capitalization method. The NIFTY 50 is an index diversified across 13 sectors of the nation’s economy
Under the normal circumstances, asset allocation will be as under:
Table 2: Asset Allocation of BOI AXA Bluechip Fund
|Instruments||Indicative Allocation (% of net assets)||Risk Profile|
|Equity & Equity related instruments of Large Cap Companies||80||100||High|
|Equity & Equity related instruments of Mid & Small Cap Companies||0||20||High|
|Debt including Corporate Debt and Money Market instruments||0||20||Low to Medium|
|Units issued by REITs and InvITs||0||10||Medium to High|
(Source: Scheme Information Document)
Who will manage BOI AXA Bluechip Fund?
Mr Dhruv Bhatia will be the dedicated Fund Manager for the scheme.
Mr Dhruv Bhatia is a Fund Manager at BOI AXA Investment Managers Pvt Ltd. and has over 9 years of experience in the Asset Management Industry. Prior to BOI AXA, he was associated with organizations such as AUM Fund Advisors LLP and Sahara Mutual Fund as an Equity Investment Analyst.
His qualifications include Bachelors of Management Studies from University of Mumbai and PGDM (Finance) from SIES College of Management Studies. Currently other schemes under his management are BOI AXA Midcap Tax Fund – Series 1 – a 10 year closed ended equity linked savings scheme and BOI AXA Midcap Tax Fund – Series 2 – a 10 year closed ended equity linked savings scheme.
Fund Outlook – BOI AXA Bluechip Fund
Being a bluechip fund, BOI AXA Bluechip Fund can be expected to be less volatile as compared to mid-cap funds small cap–funds, or even multi-cap funds. The fund will invest in large -cap stocks that tend to generate stable returns even during tough market conditions and recover faster after surviving the tides of market volatility.
Do note that stock selection and how well-diversified the portfolio is across a range of sectors that are expected to do well over medium to long-term play an important role that will determine the fund’s performance compared to its peers. Remember that volatility impacts large-cap names as well and thus, it is important to have a long-term view when you invest in large-cap funds.
This scheme is suitable for investors with moderate to high risk appetite looking to generate capital appreciation at lower risk compared to mid-cap and small-caps. Ensure that your investment objective aligns with the fund’s objective.
This article first appeared on PersonalFN here