Mutual Funds

Invesco India Growth: Rides out volatility with smart moves

Nalinakanthi V | Updated on January 20, 2018 Published on May 29, 2016



This diversified large-cap-oriented fund has delivered consistent returns

It’s been a roller coaster ride for Indian equities in the past year, with bellwether indices Sensex and Nifty shedding nearly 9 per cent during this period. Weakness in global economies and slow growth back home may continue to keep the stock market turbulent.

But every fall presents a buying opportunity for the long term. Investing in diversified large-cap-oriented funds with a good track record of containing downside during volatile phases and delivering healthy gains creates wealth in the long term.

Invesco India Growth Fund is one such fund. Originally launched by Lotus Mutual Fund in 2007, the fund has managed to tide over downcycles in the past. It ranks in the top quartile over three and five years.

Investors with a moderate risk appetite and investment horizon of five years could invest a portion of their surplus in Invesco India Growth Fund. The fund, called Religare Invesco Growth until a month back, was renamed Invesco India Growth after Invesco bought out Religare Securities’ stake completely.

The fund has been able to deliver returns higher than its benchmark consistently. Its annual returns over the last five years have been better than its benchmark almost 87 per cent of the time.

Scoring across phases

The fund has had a good track record of arresting NAV falls during corrective phases. Consider the January 2008-March 2009 period, when its benchmark BSE 100 Index shed nearly 64 per cent; the fund managed to limit the fall to about 58 per cent. Adding healthcare stocks such as Cipla and Lupin and selling holdings in infrastructure companies such as Gammon India, Hindustan Construction Company, Jyoti Structures and Jaiprakash Associates helped.

Similarly, in the subsequent corrective phases in 2011 and 2013, the fund contained the downside better than its benchmark. While the fund has proved its mettle, higher skew towards large-cap stocks — over three-fourths of its portfolio — did limit its ability to outperform the benchmark convincingly during relief rallies.

The fund scores well on a risk adjusted returns basis, compared with peers. For instance, its Sharpe ratio of 0.79 is higher than the average of peer funds in the large-cap category (0.59). Its expense ratio of 2.39 per cent is in line with the category average and lower than that of peers, such as L&T India Large Cap, ICICI Prudential Select Large Cap Fund and Canara Robeco Large Cap+.

In September 2015, the fund was merged with its peer fund — then called Religare Invesco Agile Fund. Since then the fund’s holding in financials has gone up by 10 percentage points to 30 per cent as of April 30.

The top holdings in the sector include HDFC Bank and Axis Bank, among the better performing stocks.

While the fund has pared exposure in pharma stocks during this period, it has been a buyer in IT and FMCG stocks.

Published on May 29, 2016
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