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Among the big gainers in the ongoing bull run in the market is the L&T India Value Fund. This multi-cap scheme has notched up a tidy 67 per cent return in the past one year. This makes the fund one of the best performers in the category. It also outperformed its benchmark — the BSE 200 — by a solid 28 percentage points.
The strong performance last year has lifted the fund’s three-year annualised return to 23 per cent, 8 percentage points higher than the benchmark return.
The fund has also been fairly consistent — its annual rolling return (since inception in January 2010) bettered that of the BSE 200 more than 70 per cent of the time. It figures in the top- quartile of multi-cap funds over the three-year period too. While the fund has proven its mettle in rising markets (it did much better than the benchmark during the December 2011-January 2013 bull run too), its performance during weak market periods has not been impressive.
The fund lost a little more than the BSE 200 in both market downturns of November 2010-December 2011 and January 2013-August 2013.
The seeming inability to cap downsides in weak markets is likely a result of what gives the fund a boost in rising markets — large exposure to riskier mid- and small-cap stocks.
Significant mid-cap betsAbout half the fund’s current portfolio comprises small- and mid-cap stocks, solid performers when the market is in a buoyant mood but shrinking violets when the tide turns.
Of the 38 new additions (mostly small- and mid-caps) in the fund’s portfolio over the last year, 30 stocks have more than doubled. Picks such as BEML and VST Tillers Tractors have quadrupled. The fund did well by exiting laggards such as ITC, Jet Airways and Idea Cellular.
It helped that the fund moved quickly last year during the shift in market sentiment away from defensive sectors such as software and pharma towards cyclical sectors such as banks and capital goods.
Some stocks such as Shree Cement and Fag Bearings held since inception have tripled to quintupled since, affirming the efficacy of the fund’s mandate to focus more on under-valued securities. The fund has remained nearly fully invested across market cycles over the past three years. With 15 per cent allocation, banking is currently the largest sector in the fund’s portfolio.
This should hold the fund in good stead if the economy picks up as expected and the market retains momentum.
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