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Investors who have a moderate risk appetite and wanting some exposure to mid-cap stocks can look at investing in Canara Robeco Emerging Equities Fund.
The scheme comes under the large- and mid-cap category. According to SEBI, funds in the large- and mid-cap category have to invest at least 35 per cent each of their assets in large- and mid-cap stocks.
Since its recategorisation into a large- and mid-cap scheme, Canara Robeco Emerging Equities has handled this mandate quite deftly.
Strategy and performance
In its earlier avatar, before May 2018, the scheme was a pure mid-cap fund.
It was reclassified under SEBI’s new norms. It also changed its benchmark index to the Nifty LargeMidcap 250 TRI from the S&P BSE 200 TRI.
In the past one year, the fund has beaten its benchmark by a wide margin.
In the three-year and five-year periods too, it has outperformed the benchmark.
The fund moves between defensives and cyclicals according to the market conditions. This makes it very agile to take advantage of the performance of sectors based on macro-economic conditions.
Till April 2020, the scheme did not have any position in Hindustan Unilever. Considering that FMCG has been a defensive bet during the pandemic, the scheme loaded up on the HUL stock thereafter.
Similarly, it bought Ashok Leyland recently, betting on a turnaround in commercial vehicle sales soon.
Portfolio
From our last review of the fund, large-cap holding has fallen three percentage points to 50.6 per cent by the end of September 2020 from 53.4 per cent at the end of June 2020. This shows the fund could be periodically booking profits as markets inch up.
The scheme trimmed its holding in Abbott India by nearly 50 basis points to 1.48 per cent of its assets, from April 2020 to September 2020, while the stock was rising. Similarly, it trimmed its holding of Britannia Industries by nearly 70 bps, from March 2020 to September 2020, as the stock kept reaching new highs.
The fund has been adding and reducing stake in Infosys over the past few months, to take advantage of price volatility. Infosys is one of the few Indian IT services companies that expects a positive revenue growth in dollar terms in 2020-21.
Before the pandemic broke out in India, in January 2020, the fund maintained the a minimum 35 per cent exposure to mid-caps. Since July, it has added firms such as Ashok Leyland, Mindtree, Vinati Organics and Mahindra & Mahindra Financial Services. The fund had nearly 43 per cent of its assets in mid-caps at the end of September 2020.
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