Investors can buy the units of L&T Equity (formerly Fidelity Equity), given its proven record of delivering steady returns over the long term.
The fund may not deliver spectacularly, but can be trusted to provide reasonable returns with relatively lower risks. L&T Equity has outpaced its benchmark BSE 200, over three- and five-year timeframes, though it has fallen behind a bit over the last one year. The fund has generally managed to outperform its benchmark by 3-5 percentage points.
In the last five years, the scheme has delivered a compounded annual return of 6.3 per cent, which places it in the top quartile of funds in its category, higher than peers such as HDFC Growth, Birla Sun Life Equity and IDFC Equity.
L&T Equity is a multi-cap fund, though a majority of its portfolio is made up of bluechip stocks. With such a focus, together with some mid-cap exposure, the fund manages to deliver steady out-performance. A large-cap focus may be advisable in the current volatile market environment as such companies enjoy greater earnings visibility and, to some extent, are still reasonably valued.
The scheme is suitable for investors with a moderate risk appetite, looking for a diversifier to build a long-term portfolio. Investors can take the systematic investment plan (SIP) route to take exposure to the units of the fund.
Portfolio and strategy: L&T Equity predominantly invests in large-cap stocks and allocation to mid-cap shares (less than Rs 7,500 crore) is generally restricted to 10-15 per cent of the portfolio. Banks, financial services and software have always been the top few sectors held by the fund. Consumer non-durables, pharma and petroleum products too have figured prominently, though the proportion allocated to each of these segments has varied based on the valuation at which the sectors trade.
The scheme takes cash positions to the tune of 6-7 per cent of the portfolio during volatile and falling markets, which can increase to over 10 per cent in case of highly corrective phases.
L&T Equity has also made its portfolio more compact in recent times. From around 65 stocks in the portfolio, the number has been trimmed to 50-55. A good portion of the portfolio comprises stocks from the Nifty and BSE 100 basket, which have a reasonably stable earnings outlook. The fund also churns the stocks in its portfolio regularly. In the last one year, as many as 20 stocks have been exited, while 13 have been taken up. Apart from marquee names, stocks such as Wabco India, Rallis India, Shriram Transport and Oracle Financial Services, which have witnessed strong rallies, have consistently been retained by the fund.
Invest in the fund for steady, rather than superlative, returns over a five-year timeframe. The NAV per unit of the growth option is Rs 36.6.