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Investors looking for stable returns can choose L&T India Large Cap fund, with its portfolio of solely large-cap stocks. Aside from a blip in its performance in 2012, it has stayed in the top quartile of funds in its category. Large-cap stocks can provide some stability to portfolio returns in the currently volatile market.
In the past five years, the L&T Large Cap fund has pulled ahead of its benchmark (BSE 100) more than three-fourths of the time on a rolling annual returns basis, indicating a fair degree of consistency. Investors should have a longer holding period of at least five years to acquire meaningful returns. In the one- and five-year periods, the fund has bettered its benchmark by 3-4 percentage points. It has outdone peer funds such as Axis Equity and Canara Robeco large Cap+.
L&T Large Cap has done well across market cycles barring the rising market of 2012, when it was affected by an overtly cautious stance early that year — debt and cash made up 8-10 per cent of the portfolio — and premature sector calls.
Strategy
L&T Large Cap, for the most part, favours reasonable valuations. In 2012, for example, the fund pared holding in a then ‘in-theme’ sector such as pharmaceuticals and hardly added to FMCG despite the soaring valuations.
It also had higher holdings in software companies, which served it well through 2013. Similarly, holding in oil companies panned out in late-2013, as did higher exposure to infrastructure and cement. Its July portfolio price-earnings multiple of 18.4 times is on par with the BSE 100. While the fund holds a large set of stocks, its top ten holdings are often concentrated, even constituting half the portfolio. This raises the fund’s overall risk.
Banking and finance have been the top sector holdings at over 20 per cent.
Exposure to software, which had been hiked during 2012 and 2013, has been cut in this calendar as stocks have run up and opportunities have opened up in other sectors.
Auto ancillaries such as Motherson Sumi, Bosch and Amara Raja Batteries have been picked instead. Exposure to Larsen & Toubro, engineering companies such as Crompton Greaves, Bharat Electronics and Engineers India, and logistics player Container Corporation has boosted returns.
The fund is playing the consumer discretionary theme by adding to automobiles, which are seeing improved fortunes.
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