The broader markets continue to be volatile and investors may be a tad wary about mid- and small-cap stocks as earnings fluctuate and shares nosedive. Large-cap funds may be a good option for investors with a moderate risk appetite in the current environment.

In this regard, investors can buy the units of SBI Magnum Equity (Magnum Equity), a large-cap fund with a long track record, which has improved its performance significantly over the past 3-4 years.

The fund has managed to outpace its benchmark Nifty over one-, three- and five-year timeframes. The extent of outperformance has been to the tune of 1.5-3 percentage points. Over the last three years, Magnum Equity has delivered compounded annual returns of 10.5 per cent, which places it in the top quartile of funds in its category, ahead of the likes of Franklin India Bluechip and DSPBR Top 100 Equity.

The fund takes a concentrated approach to stocks, which makes it a tad risky. But such exposure is normally taken in stable index names. Magnum Equity may be a good option for investors with a longer investment horizon of at least 4-5 years and who are looking for steady returns.

Investors can take the SIP (systematic investment plan) route to take exposure to the fund.

Portfolio and strategy

Magnum Equity was a middle-of-the-road performer prior to 2008-09. But over the past 3-4 years, the fund has managed to catapult itself to the top quartile by judiciously latching on to the right set of sectors that enabled outperformance.

The fund takes significantly high exposure to individual stocks, which can even be above 9 per cent. In its recent portfolio, the top 10 stocks account for 64 per cent of the overall pie.

But the stock picks are mostly from the Nifty basket and hence offer some amount of stability with lower volatility. Banks and financial services have always been the segments that have figured quite prominently in the fund’s portfolio. IT services, consumer goods and energy sectors too are among the top sectors invested in by the fund. Most of these sectors have had a good run this past year.

Magnum Equity manages to contain volatility and fall in downsides during market corrections by increasing the proportion of cash and debt holdings in the portfolio. For example, in the 2011 correction, the fund held cash and other current assets to the tune of over 12 per cent of the portfolio at times and gradually reduced as the year progressed and the markets bottomed out.

Overall, Magnum Equity, which is a scheme that has been around for more than 20 years, may be a fund if you are looking for a steady pick among the large-cap funds.

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