Mutual Funds

DSP Equity Opportunities: Mid-caps help spice it up

Yoganand D | Updated on June 27, 2020 Published on June 27, 2020

About 55% of the fund’s assets is allocated to large-caps and 35% to mid-caps

The large- and mid-cap indices are showing signs of recovery post-market correction and are charting northwards.

The valuations look reasonable, relative to historic levels in these segments. Investors with more than a five-year time-frame can buy the units of DSP Equity Opportunities, a large- and mid-cap fund with a two-decade-long track record.

The fund invests in both large- and mid-cap stocks and is benchmarked against the Nifty LargeMidcap 250 TRI.

It has outpaced the benchmark over the past one year, withstanding the current volatility in the broader market.

The fund has fallen 6.8 per cent compared with the benchmark’s decline of 9.2 per cent over the past one year.

It fund has delivered in-line return of 1.5 per cent compared with the benchmark return of 1.6 per cent, and has outperformed the category average return of negative 0.36 per cent over the past three years.

Over the past five-year period, it has posted 6.8 per cent gain, similar to the benchmark return of 6.4 per cent

The scheme had performed well in the bull markets in 2017 and 2019; it delivered 40 per cent and 11 per cent, respectively, while the category registered 43 per cent and 10 per cent, respectively. During the equity market downturn in 2018, the fund underperformed due to poor performance in the banking stocks.

To ride out the market volatility, and also to average costs, investors with a long-term horizon can take the systematic investment plan (SIP) route to invest in the fund that could be suitable for core equity allocation. The fund is rated four-star by BusinessLine Portfolio Star Track MF Ratings.

Portfolio and strategy

DSP Equity Opportunities predominantly invests in large-cap stocks, while some portion goes to mid-cap stocks to boost returns over the long run. About 55 per cent of the asset allocation goes into the large-caps and 35 per cent to the mid-caps.

It has invested as high as 98 per cent in equities in some periods. But it has upped the cash position to about 6.8 per cent in the recent period considering the uncertain market situation.

 

 

The fund holds a diversified portfolio with 67 stocks in its portfolio, and predominately picks stocks with high liquidity.

Its exposure to other individual stocks is less than 3 per cent, excluding a few top holdings. From a high exposure of 35 per cent to banks in June 2019, the fund had begun to gradually reduce the exposure and now holds 19 per cent.

Also, it has trimmed the allocation to pharma and software sectors.

It has taken significant exposure to financial, materials and industrials sectors, and upped its allocation in the telecom, fertilisers, consumer durables and cement. Over the past year, it added automobile and mineral sectors and increased their allocations.

Industrial capital goods and hotel sectors are the recent additions. ICICI Bank and HDFC Bank are the top banking stocks that have performed well in the long run. Stocks such as Bharti Airtel and Coromandel International have delivered good returns over the past six months.

Other large-cap stocks in the portfolio are Reliance Industries, Hero MotoCorp, Infosys and Hindustan Unilever.

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Published on June 27, 2020
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