Fund Call: BNP Paribas Large Cap Fund

Investors with a long-term horizon of more than five years, looking for a pure large-cap fund, can buy units of BNP Paribas Large Cap (formerly BNP Paribas Equity).

It has managed to deliver stable benchmark-beating returns over the long term, despite minor phases of underperformance like any other large-cap fund. BNP Paribas Large Cap is benchmarked against the Nifty 50 TRI and has outperformed it over five- and 10-year time frames.

In the short term, for instance, over the past one year, the fund has clocked 14.4 per cent returns and has outpaced almost all its large-cap peers apart from Axis Bluechip fund. Interestingly, in this period, BNP Paribas Large Cap has beaten its benchmark as well as the large-cap category average, by a wide margin of 10 percentage points.

Performance and strategy

Given that the fund has delivered stable returns over the long term, our Star Track Rating is four-star. It limited the downside well in 2011 and the fund’s performance was excellent until 2015. After a blip in 2016, it managed to bounce back in the subsequent year.

Similarly, following a lacklustre show in 2018, BNP Paribas Large Cap has delivered a year-to-date return of 12.8 per cent. It is among the top quartile of large-cap funds. With the on-going market volatility in the equity market, investors can opt to invest through various systematic options like SIPs and STPs, besides making lump-sum investments.

Apart from predominantly investing in large market capitalisation companies, the fund invests a small portion in debt and also takes cash calls.

In the recent portfolio, the fund allocates about 90 per cent for assets in equity holdings and the balance goes into fixed income.

Within this, about 6.7 per cent is invested in the liquid fund — BNP Paribas Liquid and the rest in money market instruments. Depending on the market scenario, the fund rebalances the equity and debt portions. For instance, in March this year, the fund increased its equity allocation to 97 per cent before the rally, to new highs, and drastically reduced to 88 per cent in July, as the corrective phase began.

BNP Paribas Large Cap holds a compact portfolio with approximately 29 stocks, which are mostly large-cap growth-oriented. Banks are the most preferred sector choices with an allocation of 27 per cent and private-sector banks namely HDFC Bank, ICICI Bank and Kotak Mahindra Bank have delivered good returns. The finance sector comes next. Similarly, stocks like HDFC and ICICI Prudential Life Insurance have boosted the portfolio. Consumer non-durables and software are the other preferred sectors. Good rally in the stocks of Asian Paints, HUL, Marico, Infosys and TCS have pushed its NAV higher. On the other hand, the fund avoided pharma and media stocks in January and invested in other sectors. Quality blue-chip stocks continue to boost returns.

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