Mutual Funds

A piece of the mid-cap action

K Venkatasubramanian | Updated on May 18, 2014


With a mix of Nifty stocks and quality mid-caps, this fund is a good portfolio addition

Large-cap stocks have had a breathless run in this stock market rally, but mid-caps trade well below their previous highs. If you would like to bet on the best of both worlds, the Birla Sun Life Equity Fund combines a large-cap portfolio, with mid-caps for a lift to returns.

With a track record of nearly 15 years, the scheme has done well across market cycles. Over one-, three- and five-year timeframes, the fund has outperformed its benchmark, the BSE 200, by 3-7 percentage points. It has also done better than its category over this time.

In the last three years, Birla Sun Life Equity has managed to deliver annual returns of over 11 per cent, higher than peers such as Canara Robeco Equity Diversified and L&T Equity. Birla Sun Life Equity may be suitable for investors with a moderate risk appetite. Investments can be considered through the SIP (systematic investment plan) route. An investment horizon of five-seven years may be necessary for generating above-average returns.

Portfolio and strategy

The fund’s exposure to mid-cap stocks is about 15-20 per cent of its portfolio. But with its top stocks from the Nifty basket, risk arising from this is tempered.

The large- and mid-cap mix enables the fund to perform well during rallies, though there could be corrections in line with the benchmark during falls. The fund also remains fully invested across market cycles. The higher tilt to mid-caps separates it from other funds from the same house. Banks have always been the top preference for the fund and it has increased exposure to the segment in the last one year. This has enabled the scheme to participate well in the recent rally. Software and pharma are the other key segments held by the fund, lending it a slightly defensive tilt though these sectors have rallied well over the past few years.

In recent times, sectors such as construction projects and minerals have been given higher weightage in anticipation of a revival in the economy. Though sector-wise there is a lot of stability in Birla Sun Life Equity’s holding, it does heavy stock-specific churn.

As many as 25 stocks have been entered into over the past one year, while shares of as many as 30 companies have been exited.

The scheme does not take concentrated exposure to individual stocks and sectors, which means that its risk profile is quite moderate. Invest in Birla Sun Life Equity if you are looking for above-average and category-beating returns over the long term.

Published on May 18, 2014

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