Mutual Funds

SBI Large & Midcap: Balancing risk with stability

Yoganand D | Updated on June 01, 2019 Published on June 01, 2019

The fund has outperformed its benchmark index over the past five- and 10-year periods

Investors looking for the stability of large-caps as well as an opportunity to enter mid-caps that have been beaten down in recent times can buy units of SBI Large & Midcap (formerly SBI Magnum Multiplier). This large- and mid-cap category fund has outperformed its benchmark index — Nifty LargeMidcap 250 TRI — over the past five- and 10-year periods. It suits those with a moderate- to high-risk appetite. The scheme’s ability to invest across large- and mid-caps gives it flexibility to adjust its holdings according to the market cycles. In the past 10 years, the fund has delivered compounded annual returns of 14.3 per cent, placing it in the top quartile of the category.

Fund strategy

SBI Large & Midcap follows a combination of growth and value style of investing; it adopts a blend of top-down and bottom-up approach for stock-picking. While the fund invests about half of its holdings in mid- and small-cap stocks, it somewhat mitigates the risk by not taking concentrated exposure to individual stocks in this space.

The scheme also manages its asset allocation well. Equity holdings constitute 90-97 per cent of its portfolio depending on the market condition.

For instance, when the market witnessed a corrective decline in mid-2018, the fund lowered its equity allocation to 92 per cent in October 2018, taking a cautious stance.

Banking is the preferred sector, and the fund has gradually upped its the allocation to 23 per cent over the past year. While reducing exposure to consumer non-durables and finance in the same period, the scheme has increased its allocation to pharma and consumer durables. Moreover, it has taken exposure in cement, construction projects and pesticides while exiting chemicals and non-ferrous metal sectors. This rejig has paid off for the fund, helping it deliver 6.3 per cent returns over the past one year, beating the category average return of 2.5 per cent.

Though mid-cap stocks have been underperforming over the past one year, the large-caps in the portfolio have helped the fund deliver positive returns.

The mid-cap category has delivered a negative return of 3 per cent; in contrast, the large-cap category has gained 9.8 over the past year.

The large- and mid-cap category has balanced this well, and clocked a positive return of 2.5 per cent in the same period.

Key holdings

To ride the volatility, investors can opt for the systematic route to buy units of SBI Large and Midcap. It currently holds 52 stocks. Amid churning, the scheme continues to hold key large-cap stocks such as HDFC Bank, ICICI Bank, SBI and Infosys that have delivered good returns, balancing the underperforming mid-caps stocks.

However, mid-cap stocks such as Jubilant FoodWorks, JK Cement, Relaxo Footwears and AU Small Finance Bank that the fund holds are showing signs of recovery.

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Published on June 01, 2019
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