Mutual Funds

BNP Paribas Mid Cap Fund - INVEST

Nalinakanthi V. | Updated on November 17, 2013

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Thanks to incessant buying by Foreign Institutional Investors (FIIs), large-cap stocks have been on a roll, propelling benchmark indices — Sensex and Nifty — to new highs. However, the same enthusiasm was not present in the mid- and small-cap stocks category.

The valuation difference between large- and mid-cap stocks has crossed 25 per cent, the highest in the last many years.

BNP Paribas Mid Cap may offer a good opportunity to take advantage of any rally in such stocks as they seek to bridge the valuation divide. It may be a good option for investors with a three-to-five year perspective. Despite the market turbulence, BNP Paribas Mid Cap not only managed to turn around its performance but also consistently beat its benchmark during the last three years.

Beating benchmark

Right sector shifts and stock choices have helped the fund beat its benchmark consistently from April 2010. For instance, during the period November 2010-December 2011, the fund succeeded in arresting the fall in its NAV to 27 per cent, lower than the 37 per cent slide for its benchmark.

Increasing exposure to financials and agri-inputs, such as agro-chemicals and fertilisers, in addition to buying into defensives — FMCG and Pharma — helped the fund outshine the benchmark.

Similarly, during the recovery rally between December 2011 and January 2013, the fund’s NAV jumped almost 51 per cent, compared with a 36 per cent rise in the CNX Midcap Index.

Higher exposure to export-oriented sectors — Pharma and IT — helped the fund’s performance. Its strategy to increase allocation to financials, media and telecom stocks also paid off. Also, reducing holdings in oil and gas companies lifted its relative performance.

A monthly investment in the fund over the last three years would have yielded annual returns of over 16 per cent. From April 2010, the fund has managed to clock returns higher than its benchmark 95 per cent of the time.

Portfolio

In the last one year, the fund has increased exposure to IT, telecom and select financial stocks. It has increased its holding in stocks such as Idea Cellular, City Union Bank, Hindustan Zinc, Puravankara and Orient Cements. Likewise, it has reduced exposure to stocks such as South Indian Bank, Orient Paper and Industries, Texmaco and OnMobile Global.

As of October, the fund held 43 stocks in the portfolio with a weighted average market capitalisation of over Rs 14,000 crore. The scheme is currently betting big on financials.

The fund also has meaningful exposure to IT, auto ancillaries and pharma stocks, which are likely to benefit from the weakness in the rupee vis-à-vis the US dollar.



Published on November 16, 2013

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