Motilal Oswal MOSt Focused 25 Fund - Buy

Motilal Oswal MOSt Focused 25 Fund has been around only since May 2013. But the fund’s showing over the two-and-a-half years since its inception has been impressive. The fund has beaten its benchmark, Nifty 50, both during the market rally from August 2013 to January 2015 and in the decline since then. Investors willing to take a bet on a not-yet-seasoned but promising fund can invest in Motilal Oswal MOSt Focused 25.

On a one-year daily rolling return basis, the fund has done better than the benchmark nine times out of 10 since inception and almost all times over the last year.

It has also scored over most of its large-cap peers, landing it a place in the top quartile. The fund’s mandate of investing in up to 25 companies does not prevent it from taking bets on mid- and small-cap stocks.

But since inception, it has focused predominantly on large-cap stocks. While it held one or two mid-caps (Bata India and MCX) in the initial stages, the fund has, since February 2014, invested only in large-caps (market capitalisation of above ₹10,000 crore). This makes the fund less volatile and pegs down its risk quotient.

That said, a limited number of stocks (rarely exceeding 20) does mean that the fund has to take concentrated bets with exposure to stocks at times inching close to 10 per cent of the portfolio. As of October 2015, Maruti Suzuki, HDFC Bank and Britannia Industries each accounted for more than 8 per cent of the portfolio.

A large bet going wrong could drag returns, but the fund’s good stock selection so far has helped it mitigate this risk. Stocks such as Cummins India and Maruti Suzuki, held since inception, have more than doubled. Also, additions to the portfolio over the last year such as Britannia Industries have gained handsomely.

The fund has also timed its exits well. For instance, it sold its stake in MCX in the early stages of the NSEL scam, and in Cairn India and ONGC before the rout of crude oil intensified last year. The fund exited Page Industries prematurely, but such missteps have been rare.

The ability to participate well in upsides and contain downsides has seen the Motilal Oswal MOSt Focused 25 Fund deliver returns of about 7 per cent over the past year in contrast to the 6.5 per cent dip in the Nifty 50.

The fund has also done better than most large-cap focused funds, including similarly themed peers, such as Axis Focused 25 and DSP BR Focus 25. This is despite the fund’s expense ratio being higher than the category average.

Motilal Oswal MOSt Focused 25 Fund generally invests nearly its entire portfolio in equity. At about 20 per cent, private banks form the largest chunk of its portfolio currently.

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