Considering the uncertainties arising from the impact of Covid-19 on India Inc, large-cap stocks are a safe bet for investors at this juncture. At the same time, the fall in mid-cap stocks in the market mayhem since late February presents a good opportunity as well. The large- and mid-cap category funds are ideal for those who want the best of both worlds.

Inveso India Growth Opportunities holds promise in this category. Originally a large-cap-oriented fund, it was reclassified as a large- and mid-cap fund under SEBI’s new classification norms in early 2018. After the change, the fund typically holds up to 65 per cent in large-cap stocks and around 35 per cent in mid-cap stocks.

The fund is benchmarked against the S&P BSE 250 LargeMidCap 65:35 TRI Index, and has outperformed the index over one-, three- and five-year periods by 1-4 percentage points.

Strategy

The scheme does not take big debt or cash calls. Despite the market fall since late February, the fund has held 95-96 per cent in equities in February and March. This exposure is upped a bit more, up to 99 per cent, when the market is in an upswing, as in 2014 and 2017.

The fund churns sectors well. For instance, it pushed up its holdings in the auto sector to 12-13 per cent in 2017 and benefited from the good offtake in new vehicles after the lull caused by demonetisation and teething troubles in GST implementation. In 2017-18, automobile sales grew by 14.2 per cent year-on-year.

However, the scheme was quick to sense the down cycle, too, and has pruned its stake in this segment since 2018. The fund holds just over 2 per cent in automobile stocks now. Given the prevailing uncertainties, it has increased its holdings in defensive sectors such as consumer non-durables and pharma.

It has a portfolio turnover of 43 per cent. This is relatively low in comparison with that of peers Mirae Emerging Bluechip, Canara Robeco Emerging Equities and SBI Large & Midcap.

Although the fund scored marginally below the benchmark in the 2017 rally, it has proved its mettle. The scheme outperformed the benchmark in the 2014 rally, in the volatile markets of 2013, 2016, 2018 and 2019, as well as in the fall of 2011. It has contained losses better than the benchmark so far in 2020.

Over longer periods of three, five and 10 years, the fund is among the top performers in the large- and mid-cap category, both in terms of lump-sum as well as SIP returns.

Portfolio

The fund usually holds a portfolio of about 50 stocks.

It takes a concentrated exposure of 6-7 per cent in its top holdings. Beyond this, the holdings are fairly well-diversified.

Since its reclassification as a large- and mid-cap fund, the scheme has steadily been holding 35-37 per cent in mid-cap stocks. Banks have been the most preferred sector. Top exposures are in HDFC Bank, ICICI Bank and Kotak Mahindra Bank.

While holding in this space was at 22 per cent in November 2019, it has come down to 16.6 per cent now. The fund seems to be taking a cautious view over the fallout of the Covid-19 pandemic on banking stocks.

Stocks such as HDFC, Nippon Life India Asset Management, Siemens, Jubilant FoodWorks, L&T Infotech and Gujarat Gas were added recently.

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