The Hindu Business Line : Canara Robeco Equity Diversified: Hold

Unit holders can retain their holdings in Canara Robeco Equity Diversified Fund based on the long term performance. The fund, having trailed the category average over its initial years, has managed to improve its performance over the past three years.

Its compounded annualised return of 10.8 per cent over a five-year time frame has outpaced the benchmark BSE 200 by four percentage points.

The fund prefers to invest across the market capitalisation range. During the volatile one year period, it has contained the downside better by spreading the investment across many sectors. It has declined less than the bellwether indices, the Sensex and Nifty.

This fund’s flexicap approach involves taking higher risks in comparison to pure large cap funds. The return generated by the fund, however, has not been much superior to the large cap category. Over a five-year period, it has managed to beat the BSE Sensex by 1.0 percentage points.

It may be appropriate for existing investors to hold on to the fund. But going by the track record, fresh investment can be considered in pure large cap funds ahead of Canara Robeco in the current uncertain market conditions. If there is a recovery in the markets over the next few quarters, large cap stocks may rally ahead of midcap and smallcap stocks. In the case of Canara Robeco Equity, a small asset base may come in handy to manoeuvre the portfolio based on the market conditions.

The fund’s ability to churn the portfolio to earn higher returns was visible in the recent market recovery. Between the lows of October and now, the fund’s NAV has grown by 30 per cent in absolute terms. During the same period large cap funds generated a return of 15 per cent. However, this bounce may not be indicative of sustained performance.

Portfolio Overview: The fund, given a smaller asset base, has a well diversified portfolio that comprises 40 stocks from 17 sectors. Top ten stocks accounted for 42 per cent of the assets.

The three preferred sectors — banks, telecom and pharma — together cornered 39 per cent of the portfolio. Over the past few months, the fund stepped up holdings in banking sector and pruned exposure to petroleum.

During the past year, the stock specific exposure to Reliance Industries went as high as 10.5 per cent. The fund has increased exposure to the pharma sector in the past few months from 2.5 per cent to 9.7 per cent of the assets. Divis Labs, Ranbaxy, Dishman Pharmaceuticals and IPCA Laboratories were the key stock choices in the pharma basket.

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