Canara Robeco Large Cap+ Fund: Hold

Indian equities have delivered spectacular returns in the last one year, thanks to the optimism following the change of guard at the Centre. But not all equity schemes have fully capitalised on this rally. Canara Robeco Large Cap+ Fund is a classic example.

Though it managed to deliver one percentage point more than its benchmark, the BSE 100 Index, over a three-year timeframe, its one-year returns are just in line with the benchmark.

The fund missed the rally in cyclical themes such as infrastructure and oil and gas since last September, due to its defensive strategy. It was overweight in sectors such as FMCG and IT until the first half of 2014 weighed on its NAV.

However, though the fund has not been quite successful in beating its benchmark during market rallies, it has consistently managed to contain downsides during market falls. While fresh investment can be avoided in Canara Robeco Large Cap+ Fund, investors who already hold units can continue to stay invested.

With a mandate to invest at least 65 per cent of its assets in large-cap stocks, the fund has delivered gains in excess of 70 per cent in absolute terms since its inception in August 2010. The BSE 100 Index has gained about 48 per cent during this period. The fund has delivered annual returns higher than its benchmark about 60 per cent of the time, since inception.

Higher allocation to pharma, IT and FMCG stocks enabled the fund to remain sturdy during volatile times, helping its three-year performance.

But remaining overweight in these themes, even as the tide changed in favour of cyclical sectors a year ago, weakened its performance. For instance, high exposure to TCS, RIL and ITC until the early part of 2014 derailed its performance; these stocks made modest 15-30 per cent gains in the last one year, lower than the 40 per cent jump in the BSE 100 Index.

However, the fund has now increased allocation to cyclical themes such as financials (31 per cent of the total assets), auto and ancillaries (12.1 per cent), oil and gas (11.9 per cent) and industrial capital goods (2.7 per cent). About 21 per cent of the scheme’s assets are invested in defensive themes – pharma, IT and FMCG. While it has pruned exposure to IT and FMCG, it has marginally increased holding in pharma stocks. As of October, the fund held 39 stocks in its portfolio.

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