Mutual Funds

Canara Robeco Equity Diversified: Invest

K. Venkatasubramanian | Updated on June 16, 2012

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The fund delivers on downside containment as well as upside participation across market cycles.

Investors can buy the units of Canara Robeco Equity Diversified (Canara Equity), given the fund's record of delivering steady returns on a consistent basis.

Over one, three and five-year timeframes, the fund has delivered higher returns than its benchmark — the BSE 200. The level of outperformance has been to the tune of 7-8 percentage points.

Canara Equity is a multi-cap fund, with a consistently large-cap bias, which may be an appropriate strategy in the current volatile markets as such stocks have better earnings visibility and may fluctuate less.

In the last five years, the fund has delivered a compounded annual return of 10.9 per cent, which places it among the top few funds in its category.

It has outpaced peers such as DSPBR Opportunities and Fidelity Equity over this period.

Canara Equity has been able to deliver on both counts of downside containment as well as upside participation across market cycles.

It may, therefore, be suitable for the core part of an investor's portfolio and for those with a moderate risk appetite.

Investors may also consider the SIP (systematic investment plan) route for taking exposure to the fund so as to ride out market gyrations.

Portfolio and strategy

Canara Equity generally invests over 80 per cent of its portfolio in large-cap stocks (greater than Rs 7,500 crore market capitalisation).

The proportion of mid-cap stocks has varied 10-20 per cent depending on market conditions and valuations. This mix has helped the fund ride out broad-based rallies such as in 2007 and even a slightly narrower upswing in 2009-10.

Canara Equity also managed the 2008-09 market fall by moving to debt instruments and cash to the tune of over 20 per cent.

It was able to quickly deploy cash in the 2009 rally which ensured strong participation. The top 10-15 stocks in the portfolio are generally large-cap or blue chip stocks from the Nifty or BSE 100 basket.

Both in terms of sector as well as stock choices, the fund has not gone strictly by valuations alone and has mostly favoured momentum-driven segments. This strategy has, of course, worked for the past three-four years.

The banking sector has always been the top sector held by the fund as a proportion of the overall portfolio. In early 2009, petroleum products, capital goods and telecom segments figured among the top few sectors held then.

But, subsequently, the fund was able to increase allocations to sectors such as pharma and software which had a good run in the markets in 2009-10.

As markets started to correct from late 2010, the fund churned sectors well.

So, over the past one year, banking is still the top sector and its weightage in the portfolio has been increased considerably in light of attractive valuation.

The fund has also increased allocations to consumer non-durables, an outperformer for the past one year, and among the top sectors held.

Allocations have also been increased to pharma and the software sectors, giving the fund a rather defensive look, which is important for downside containment in the current volatile markets.

Canara Equity does not take concentrated bets on individual stocks and, barring one or two cases, keeps exposure to less than five per cent of the portfolio.

This reduces the risk profile of the fund.

Published on June 16, 2012

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