Fund Call. L&T India value fund: Tap value with this nimble multi-cap fund

Investors with a moderate risk appetite could start Systematic Investment Plans (SIPs) in the L&T India value fund. It has managed to outperform its benchmark S&P BSE 200 by a wide margin. In the last one year, it gave a return of 28.7 per cent, which was 10 per cent more than that of its benchmark. Over the last three and five years too, it managed a wide margin of outperformance — atleast 10 per cent on an annualised basis.

On a one-year rolling return basis, it has outdone its benchmark 99.6 per cent of the time in the last three years. The fund picks stocks based on value-based investment philosophy by limiting the risk while capitalising on opportunities from cyclical plays, turnaround or through investments into beaten down but fundamentally good stocks. It’s the best value fund as of today.

Its three-year annualised returns of 20.5 per cent are slightly better than that of Bira Sun Life pure value (20.2 per cent) and way ahead of ICICI Pru Value Discovery (10.7 per cent) and Parag Parikh Long term Value (13.2 per cent).

The fund is essentially a multi-cap fund, investing in both large-cap and mid-cap stocks. And currently, it has about 47 per cent of its portfolio into mid-cap stocks, while the rest are in large-caps. While mid-cap exposure appears riskier at this juncture, what’s comforting is its well-diversified bets. It currently holds 81 stocks in its portfolio (most funds hold between 30-50 stocks) and its top ten stocks constitute about 31 per cent of overall portfolio. This has been a deliberate strategy of its fund manager to mitigate portfolio risk. Its fund manager sometimes takes calibrated cash calls. As early as February ’16, it had about 16 per cent of its portfolio in cash and cash equivalents. However, it has reduced that now to about 10 per cent.

Reliance Industries, HDFC, ITC, ICICI Bank and Future Retail were its top five picks, as of August 31, 2017. The company is currently overweight on construction, metals and chemicals as compared to its benchmark composition, while remaining underweight on financial and energy.

Reliance Industries, HPCL, Bajaj Finserv, Vedanta and Federal bank were top contributors to its overall returns in the last one year. In contrast, Axis Bank, Sun Pharma and Infosys remained the worst performers. In the last one year, the fund got into the counters of Future Retail, IOC, Tata Steel and KEC International, while completely exiting the counters of Manappuram, Bajaj Auto and Hindustan Zinc. In terms of sectors, it increased exposure to cigarettes, construction and refineries while exiting auto (HCV and LCV segment) in the last one year.

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