Despite the choppiness, the markets provide a good buying opportunity for those who wish to reap the long-term benefit of investing in equities.
Quality multi-cap funds, given their flexibility to switch allocation across the market capitalisation spectrum, may be a good vehicle to minimise the downside in the short term as well as maximise long-term gains.
DSP BlackRock Opportunities Fund, which has delivered benchmark-beating returns across one, three and five years, fits the bill. Its five-year return of 17 per cent is about 5 percentage points higher than that of its benchmark, the Nifty 500 Index. Investors with a long-term horizon can consider investing a portion of their surplus in this fund.
The fund’s annualised returns since inception in May 2000 is in excess of 19 per cent. This is higher than the 13.5 per cent rise in its benchmark during the same period.
The fund also scores high on consistency and has bettered its benchmark’s returns over the last five years. Its annual return over this period has been higher than Nifty 500 Index nearly 85 per cent of the time.
This is despite the change in fund manager almost thrice in the last five years. The fund is currently being managed by Rohit Singhania, who took over from Apoorva Shah in May 2015. Prior to that, the fund was managed by Anup Maheshwari and Harsha Upadhyaya.
Thanks to adept sector shifts, the fund, in the past, has managed to contain downsides during corrective phases. During the 2013 volatile phase, for instance, it reduced exposure to cyclical themes, such as financials and loaded up on defensive sectors such as FMCG and IT. Besides the right sector moves, the strategy to stick to quality names in the mid-cap space also helped arrest falls during bear phases.
The fund has been able to deliver superior returns during relief rally phases, too. For instance, between August 2013 and March 2015, the scheme’s NAV jumped by about 93 per cent. This is higher than the 81 per cent rise in the benchmark. The fund’s ability to identify multi-bagger stocks such as NCC, Dynamatic Technologies, Sintex Industries and Somany Ceramics lifted performance.
The fund’s outperformance vis-à-vis the benchmark has improved significantly since March 2016, thanks to bets in stocks such as Dalmia Bharat, Bharat Financial Inclusion, Satin Creditcare Network and Wim Plast. In the last six months, the scheme has added stocks in the financials and FMCG space and has pruned exposure to oil and gas, pharma and IT. About 70 per cent of the assets were invested in large-cap stocks as of September and the balance in mid- and small-cap stocks. The large-cap slant should help the fund contain downsides well should the turbulence continue.