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Investors with an appetite for moderate risk can consider Canara Robeco Emerging Equites. Originally a mid-cap fund, it moved to the large- and mid-cap category in May 2018, after SEBI announced its new classification norms.
Being a mid-cap fund earlier, it could take exposure of 65 per cent or more to mid-cap stocks, pegging up the risk quotient. As a large- and mid-cap scheme now, it is expected to hold at least 35 per cent of its portfolio in large-caps and another 35 per cent in mid-cap stocks, thus bringing down the risk levels slightly.
Moving to a new category has seen the fund undergo changes in its benchmark — Nifty LargeMidcap 250 TRI now, as against the Nifty Midcap Index and the BSE 200 in the past. While its mettle is yet to be tested in the new avatar, the fund holds promise, considering it has outperformed the returns of both the bellwether indices (Nifty 50 TRI and Sensex TRI) as well as the broader market indices (Nifty 500 TRI and BSE 500 TRI) over longer periods of three and five years.
Strategy and performance
Canara Robeco Emerging Equities tweaks its asset allocation and sector choices based on market conditions. For instance, when the markets were on song in 2014 and 2017, the fund held 97-99 per cent in equities.
However, it is quick to go on the defensive when markets turn volatile — 2015 and 2018 being good examples. In these periods, the fund cut back equity exposure to 94-96 per cent. It picks on defensive sectors such as consumer non-durables and pharma to ride iffy markets while latching on to cyclicals to ride on a rally.
The switch to the large- and mid-cap category came in handy at a time when mid- and small-cap stocks were taking it on their chin last year.
The fund contained losses, to an extent, by adding to its large-cap holdings, which now stands at 50 per cent. It follows a bottom-up approach in stock-picking, and predominantly adopts a buy-and-hold strategy.
Portfolio
The fund usually holds a well-diversified portfolio of 60-70 stocks, with stakes in its top holdings not exceeding 4-6 per cent. With banks back in focus after a prolonged period of underperformance, the fund has wasted no time in adding to its holdings in this space. From only 5 per cent a year ago, banks now constitute 27 per cent of the fund’s portfolio.
It has favoured private banks such as ICICI, Axis, HDFC and Kotak.
While it pruned its holdings in software stocks in the beginning of 2018 due to the clouded prospects, it has raised its exposure in this space through the year to benefit from the rally in these stocks due to better growth outlook as well as the rupee’s depreciation. While the scheme did take refuge in consumer non-durables last year due to volatility, it has shed exposure here, given the high valuation of these stocks.
Grasim Industries, City Union Bank and Mahindra & Mahindra are recent additions to the portfolio. L&T Infotech, Sundram Fasteners, LIC Housing Finance and M&M Finance are some of the quality mid-caps in the latest portfolio.
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