Mutual Funds

BNP Paribas Large Cap: A large-cap play

Yoganand D | Updated on February 22, 2020 Published on February 22, 2020

BNP Paribas   -  File photo/Bloombery

Scheme has outpaced its benchmark by two percentage points over past seven and 10 years

After a sharp decline in late January, the bellwether indices, the Sensex and the Nifty 50, have bounced back, led by large-cap stocks. Large-cap as a segment now provides a good opportunity for investors with a long-term perspective. Investors can buy the units of BNP Paribas Large Cap, a pure large-cap fund that has delivered steady returns in the long run.

The scheme is benchmarked against the Nifty 50 TRI and has outpaced it over the past seven- and 10-year time horizons by two percentage points. It has clocked returns of 14.1 per cent and 13.3 per cent in these time-frames.

BNP Paribas Large Cap has been among the top two quartiles in the large-cap category most of the time over the past five years. To mitigate the volatility, investors with a long-term horizon can also take the Systematic Investment Plan (SIP) path to invest in BNP Paribas Large Cap, apart from making lump-sum investments. It has a four-star rating by BusinessLine Portfolio MF Star Track Ratings.

In the past one year, the fund has given 18.6 per cent return and beaten some of the key large-cap funds such as Mirae Asset Large Cap, ICICI Prudential Bluechip and Nippon India Large Cap.

 

 

Performance and strategy

Following a mixed performance in 2015 and 2016, the fund revived and outperformed the benchmark and the category in 2017. Again, it underperformed in 2018, but delivered an excellent return of 17 per cent in 2019.

The scheme takes a prudent call strategy as it adjusts its equity allocation based on the equity market scenario.

For instance, during the corrective phase last July, the fund reduced its equity allocation to 88 per cent.

Then it gradually upped its equity allocation to around 95 per cent (as of January 2020).

The fund predominantly invests in large market capitalisation companies that are growth-oriented; in the recent portfolio it holds approximately 92 per cent in large-caps, while the mid- and small-caps account for 5.6 per cent and 2.2 per cent, respectively.

The scheme has a near-compact portfolio, with 36 growth-oriented large-cap companies.

The top three sectors contain 62 per cent of the portfolio. The most preferred sector is banks, with nearly 30 per cent allocation. Private sector banks such as HDFC Bank, ICICI Bank, Kotak Mahindra Bank and Axis Bank have taken the lion’s share and interestingly, they have delivered worthy returns in the past one year. Finance and software are the other major sector choices, along with consumer non-durables, with the allocation in the 9.5-13.5 per cent band.

Quality blue-chip stocks continue to keep the return on the higher side.

Notably, the fund has upped its allocation to automobiles and telecommunication services in recent times.

It has added the Hero MotoCorp stock and increased its holdings in Maruti Suzuki India as well as Bharti Airtel. Ferrous metal and pharma sectors have been added to the portfolio with about 1 per cent allocation each.

Published on February 22, 2020
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