Mutual Funds

Fund Call: Sundaram Large and Mid Cap

Parvatha Vardhini C | Updated on October 12, 2019

It is a top-quartile performer in the large- and mid-cap category

Large- and mid-cap funds provide the golden mean for investors who want a safety net for downside as well as a kicker to the returns in market upswings. This category of funds came into existence after SEBI’s new classification norms were laid out, and has a mandate to invest at least 35 per cent of its portfolio in large-cap stocks and another 35 per cent in mid-cap stocks. The idea is that the large-cap exposure will cushion the NAV to an extent in falling or volatile markets, while the mid-cap exposure will provide a leg-up to returns during rallies.

Considering it is a new category, many fund houses restyled existing funds to suit the category’s mandate. Sundaram Large and Mid Cap — earlier Sundaram Equity Multiplier — is a good fund to bet on in the large- and mid-cap space.

Performance and strategy

Sundaram Large and Mid Cap is a top-quartile performer in the category over one-, three- and five-year periods, bettering peers such as Aditya Birla Sun Life Equity Advantage and L&T Large and Midcap. In these timeframes, the fund’s returns have surpassed the benchmark — the Nifty 200 TRI — by two to four percentage points. The fund has contained losses better than the Nifty 200 TRI in falling and volatile market conditions (such as in 2011, 2015 and 2016) and has participated well in rallies (2014 and 2017 being examples). Deft allocation between large-cap and mid-cap stocks has helped. In 2017, for instance, it upped its mid- and small-cap holding to about 40 per cent to benefit from the rally, but brought it down in the early months of 2018, when the tide turned. Since May 2018, when the name change was brought in, the fund has maintained at least 35 per cent in mid-cap stocks. In recent months, the fund has upped mid-cap holdings to over 40 per cent, probably to benefit from the corrections in the space.



The fund’s sectoral choices are also based on market conditions. Thanks to the volatility in the markets since 2018, the fund sharply increased its holdings in the defensive consumer non-durables space and has been holding about 13 per cent here since the last year.


The fund predominantly holds 90-95 per cent in equities and has a compact portfolio of 30-40 stocks. It sometimes uses derivatives also, to hedge some of its stock positions. Though it has a compact portfolio, the exposure to its top stock holding is usually 4-5 per cent. Banking/finance and consumer non-durables are its top sectors. From 20 per cent in January 2019, holdings in the banking space have come down to 13 per cent now. It has cut down on Axis Bank and added Federal Bank in this period. HDFC Life Insurance, TCS and Titan are the other recent additions. Midcaps in the latest portfolio include many consumer names such as Kansai Nerolac, Whirlpool, Trent, TVS Motors and Crompton Greaves Consumer.

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Published on October 12, 2019
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