Large- and mid-cap fund. Invesco India Growth Opportunities: Taste for growth with value flavour

With the road to economic revival gaining strength, the key would now be to strike the right mix of large- and mid-cap stocks so that one gets exposure to earnings stability and business growth in the same portfolio.

Investors with a long-term horizon and adequate patience can buy units of Invesco India Growth Opportunities, a stable large- and mid-cap fund that combines growth and value to generate consistent outcomes through all market conditions. You can consider taking the systematic investment plan (SIP) route to mitigate market volatility.

The scheme currently allocates 60 per cent of its equity assets to large-caps, 36 per cent to mid-caps and 3 per cent to small-caps. Importantly, the fund has kept its small-cap allocation quite low compared with peers, thereby further de-risking its portfolio.

Performance

Invesco India Growth Opportunities, over the long term, has delivered good returns and has beaten its benchmark, S&P BSE 250 LargeMidCap 65:35 TRI. For instance, on three- and five-year daily rolling returns, the fund has outperformed the benchmark by 73 per cent and 86 per cent, respectively.

Over the past one-, three- and five-year periods, the scheme has given returns of 13.7 per cent, 8.7 per cent and 16 per cent, respectively, against the category average of 14.3 per cent, 5.8 per cent and 14.1 per cent.

Though the fund has underperformed over the one-year period, this may be attributed to the spike in the bellwether indices led by select large-and mid-cap stocks, which proved to be a hurdle for a majority of category peers.

The fund is managed by Taher Badshah and Pranav Gokhale. Gokhale started managing the scheme in May 2020.

Portfolio, strategy

Invesco India Growth Opportunities maintains a well-diversified portfolio of 40-50 stocks driven by bottom-up and top-down approaches. The top 10 stocks form 42 per cent of the total assets.

Selection of stocks is based on relative attractiveness, and preference is given to growth companies with a flavour of value.

For the growth stocks component, the scheme picks companies with industry-leading margins or return on equity, operating leverage/growth prospects better than industry, etc. For the value component, it selects companies with valuable assets in a turnaround situation (path to profit/return on equity). The proportion of growth stocks in the fund’s portfolio consistently remains above 60 per cent.

The fund doesn’t take cash calls and remains fully invested (target 95 per cent). It also does not attempt to change colours to keep with the markets’ short-term moods.

The scheme predominately prefers banks as the top sector choice and recently upped its allocation to 22 per cent. Moreover, it has also increased the allocation to software and consumer durables. On the other hand, the fund trimmed its allocation to the finance and pharma sectors in the recent times.

As on December 31, 2020, the fund, compared with its benchmark, was overweight on consumer discretionary, IT and healthcare sectors. It was underweight on energy and industrials, among others.

The scheme recently re-jigged its portfolio by exiting some of the top holding stocks such as Reliance Industries, Siemens and Sun Pharmaceutical Industries, and added stocks like Infosys, HCL Technologies, Dr Reddy’s Laboratories, Mphasis and ITC.

COMMENT NOW