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Investors with a high risk appetite can consider mid-cap funds.
In this category, DSP Midcap has a long-term track record of delivering benchmark-beating returns over short as well as long time-frames.
Over the past 10 years, the scheme has clocked an annualised return of 14.6 per cent, outpacing its benchmark’s (Nifty Midcap 100 TRI) returns of 9.4 per cent by a wide margin.
It is also a top quartile fund in the mid-cap category across time-frames. The scheme has outpaced category peers such as HDFC Mid-Cap Opportunities, Kotak Emerging Equity, Axis Midcap and L&T Midcap over the past one-year period.
In the current volatile market situation, investors can consider the SIP (systematic investment plan) route for taking exposure to the fund.
Portfolio and strategy
DSP Midcap has a portfolio of 45-50 stocks. Also, the allocation to individual stocks is usually less than 5 per cent. This mitigates risk and makes for a diffused portfolio.
The fund cushions downside well. For instance, in 2018, it plunged only 10 per cent while the category average fall was at a sharper 12 per cent.
The scheme tends to take cash and debt calls to cushion downsides during market falls or during volatile periods.
For example, equity allocation which was at 93 per cent in February and March this year, was subsequently trimmed to about 90 per cent in May as the markets were volatile. Though the fund marginally upped the equity allocation recently, it continues to be around 91 per cent.
DSP Midcap churns its top sectors quite well. For example, banks were the top sector allocation in early 2019. Thereafter, it trimmed the allocation, possibly due to NPA worries from the Covid-19 outbreak.
Currently, Pharma is the top sector choice, thanks to its moniker as a defensive segment.
Other top-preferred sectors as per the latest portfolio are industrial products, consumer discretionary, materials and financials.
Stocks such as Ipca Laboratories that the fund holds — about 5.4 per cent in September portfolio, upped from about 3.6 per cent in February — have delivered excellent returns over the last one year.
Other top holdings such as Balkrishna Industries and Infosys have also given good returns in the past one year. Some of the fund’s prominent stock holdings are Exide Industries, Atul, Supreme Industries, The Ramco Cements and Divi’s Laboratories.
At present, the scheme has invested about 72 per cent of its equity allocation in mid-cap stocks, about 19.5 in large-caps and the balance in small-caps.
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