Welcome to PersonalFN’s weekly analysis on diversified equity mutual funds! In this issue, we have analysed SBI Long Term Equity Fund, highlighting its performance, peer comparison, investment strategy, fundamentals, portfolio, and suitability.

SBI Long Term Equity Fund is among the oldest and most well-known schemes in the ELSS (Tax Saving Mutual Fund) category, that has effectively tapped into the recent broad-based market rally through diversification across market caps and sectors, placing it among the top performers.

What is the growth of Rs 10,000 invested in SBI Long Term Equity Fund five years ago

Past performance is not an indicator of future returns
Data as of March 04, 2025
(Source: ACE MF, data collated by PersonalFN) 

Launched in March 1993, over three decades ago, SBI Long Term Equity Fund, formerly known as SBI Magnum Tax Gain Fund, is one of the oldest and most well-regarded schemes in the ELSS category. The fund follows a value-conscious investment approach, maintaining a well-diversified portfolio of stocks across different sectors and market caps. SBI Long Term Equity Fund was a strong performer in the category until 2015. However, it experienced a prolonged period of underperformance from 2016 to 2019 and again in 2021, primarily due to the value investing style falling out of favour. Despite this, the fund has made a remarkable recovery during the recent bull market and now holds a strong position among its peers.

In recent years, SBI Long Term Equity Fund has benefited from rallies in Finance, Power, Consumption, and PSU stocks, and currently ranks as one of the top performers across most time periods, significantly outperforming its benchmark. Its solid long-term performance has led to substantial growth in its AUM (currently at Rs 27,306 crore), making it the second-largest scheme in the ELSS category. Managed by Mr Dinesh Balachandran, the fund focuses on undervalued stocks, which may lead to underperformance when growth-oriented stocks are preferred in the market.

Over the past five years, SBI Long Term Equity Fund has delivered a compounded annual growth rate (CAGR) of around 24.1%, surpassing the benchmark BSE 500 – TRI by approximately 6 percentage points. An investment of Rs 10,000 in the fund five years ago would now be worth Rs 29,389, compared to Rs 22,770 for a simultaneous investment in the benchmark.

How has SBI Long Term Equity Fund performed on a rolling return basis?

Scheme Name	Corpus (Cr.)	1 Year	2 Year	3 Year	5 Year	7 Year	Std Dev	Sharpe
SBI Long Term Equity Fund	27,306	47.55	37.07	26.69	25.00	17.85	14.43	0.34
Motilal Oswal ELSS Tax Saver Fund	3,876	53.11	38.90	25.72	24.08	18.01	19.47	0.22
Quant ELSS Tax Saver Fund	10,279	40.73	28.78	24.76	34.37	24.61	18.95	0.15
HDFC ELSS Tax Saver Fund	15,413	38.72	30.54	24.75	21.24	14.95	13.12	0.33
JM ELSS Tax Saver Fund	180	42.60	31.75	22.07	22.96	18.16	16.09	0.22
Bank of India ELSS Tax Saver	1,330	42.28	31.58	21.71	27.02	19.86	17.46	0.17
Franklin India ELSS Tax Saver Fund	6,438	37.45	28.74	21.28	21.12	16.06	14.43	0.23
Parag Parikh ELSS Tax Saver Fund	4,572	30.35	25.13	20.87	24.98	—	10.95	0.31
ITI ELSS Tax Saver Fund	374	44.54	33.58	20.75	19.47	—	15.39	0.23
DSP ELSS Tax Saver Fund	15,985	39.33	28.61	20.65	22.66	17.66	14.71	0.23
BSE 500 – TRI		30.32	22.78	17.13	19.39	15.29	14.82	0.15

The securities quoted are for illustration only and are not recommendatory.
Returns are on a rolling basis and in %. Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised. Risk ratios are calculated over a 3-year period assuming a risk-free rate of 6% p.a.
Data as of March 04, 2025
(Source: ACE MF, data collated by PersonalFN)
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 before investing. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

After a prolonged period of underperformance from 2016 to 2019, SBI Long Term Equity Fund has made a strong comeback, showing an impressive performance turnaround during the recent bull market. It has significantly outperformed both the benchmark and the category average during this time. Over the past 1- and 2-year rolling return periods, SBI Long Term Equity Fund has delivered an exceptional lead of around 14-17 percentage points over the benchmark, outperforming most of its peers and securing a top quartile position in the category. This recent outperformance has also boosted its returns across medium to long-term time frames. Over the 5- and 7-year periods, SBI Long Term Equity Fund has consistently outpaced both the benchmark and the category average by a healthy margin.

More notably, the fund has delivered strong risk-adjusted returns. SBI Long Term Equity Fund’s volatility (as measured by its standard deviation) is roughly in line with the benchmark and its peers, while its Sharpe ratio, which measures risk-adjusted performance, is currently the best in the category, comfortably outperforming the benchmark and the category average by a distinct margin.

What is the investment strategy of SBI Long Term Equity Fund?

Being an ELSS, SBI Long Term Equity Fund is mandated to invest a minimum of 80% of its assets in equity and equity-related instruments and aims to invest across market caps and sectors to benefit from diversification. The fund invests predominantly in large-cap stocks, where it allocates around 50-55% of its assets, while the balance is allocated in mid-cap and small-cap stocks.

SBI Long Term Equity Fund follows a mix of the ‘top-down’ and ‘bottom-up’ approach to pick stocks for the portfolio. The fund focuses on securities with high margin of safety. For this purpose, the fund follows a value bias to pick stocks trading below their intrinsic value. It also lays emphasis on sectoral themes that are expected to grow over the medium to long term. The fund prefers to hold most of its stocks with a long-term view even if they fail to pay off as expected in the short run. SBI Long Term Equity Fund’s portfolio turnover is usually around 20-25%, signifying the high conviction the fund manager has in the portfolio holdings.

What are the top portfolio holdings in SBI Long Term Equity Fund?

Holding in (%) as of January 31, 2025
(Source: ACE MF, data collated by PersonalFN) 

SBI Long Term Equity Fund usually holds around 60-65 stocks in its portfolio spread across market caps and sectors. As of January 31, 2025, the fund held 61 stocks in its portfolio with the top 10 stocks accounting for around one-third of its assets. Large-cap names such as HDFC Bank, Reliance Industries, ICICI Bank, Bharti Airtel, and Torrent Power currently form part of its core holdings. The fund has limited allocation in each mid and small-cap stock to under 3%. SBI Long Term Equity Fund follows a ‘buy-and-hold’ investment strategy. Thus, most of the stocks in its holdings have been part of its portfolio for many years now.

In the last two years SBI Long Term Equity Fund benefitted the most from its exposure to stocks like GE T&D India, Mahindra & Mahindra, Cummins India, Bharti Airtel, and Torrent Power that contributed around 33% to its absolute gains. It also gained from its allocation in Lupin, L&T, ICICI Bank, GAIL (India), and ONGC, among others.

Although, SBI Long Term Equity Fund favours cyclical sectors that may benefit from an upcycle in the domestic economy, it also holds substantial weightage in defensive and sensitive sectors. The fund’s portfolio is skewed towards the Banking & Finance sector, that forms around 25% of its portfolio, along with diversification to Infotech, Engineering, Petroleum, Pharma, Consumption, Auto, and Oil & Gas among others. The top 5 sectors cumulatively account for about 48% of its assets.

Is SBI Long Term Equity Fund suitable for my investment goals and risk tolerance?

Although SBI Long Term Equity Fund faced prolonged underperformance between 2016-2019 and again in 2021, raising concerns among investors, the fund has made a strong comeback in the recent bull market, delivering impressive returns. Over the past few years, it has capitalised on the broad-based equity market rally, significantly outperforming the benchmark and many of its peers, rewarding investors for their patience.

It typically maintains a diversified portfolio across different market caps and sectors, aiming to seize various market opportunities. In overheated market conditions, the fund may hold a higher cash balance, waiting for more attractive market valuations. Managed by Mr Dinesh Balachandran for over eight years, SBI Long Term Equity Fund has benefited from his skill in identifying high-potential stocks and sectors, which has been highly rewarding for the fund and its investors in recent years.

SBI Long Term Equity Fund is well-suited for investors seeking a diversified Tax Saving Mutual Fund (ELSS) with an investment horizon of at least 3-5 years.

Watch this video to explore the best performing ELSS (Tax Saving Mutual Fund) for 2025:

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. Registration granted by SEBI, Membership of BASL and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.

This article first appeared on PersonalFN here