SBI Magnum Multicap: If you can take a little risk

Following a lacklustre show and underperforming the benchmark index S&P BSE 500 in the years 2010 and 2011, the returns record of SBI Magnum Multicap has improved significantly.

Over one, three and five-year periods, the fund has outperformed the S&P BSE 500 by 4-13 percentage points. In the last five years, SBI Magnum Multicap has delivered 12.6 per cent annually.

The scheme is a good bet for investors with a five-seven-year horizon and with stomach for the volatility that comes from mid-cap investments.

The fund stands in the top quartile among its category over one and three-year periods. Moreover, it has beaten its peer funds, such as Mirae Asset India Opportunities and Reliance Equity Opportunities over this timeframe The fund allocates nearly half of its portfolio to mid and small-cap stocks.

While this increases the risk profile of the scheme, it tempers it with debt and cash calls during volatile markets.

Investing through the SIP (systematic investment plan) route could average the costs and ride out market volatility.

While SBI Magnum Multicap does take significant mid-cap bets, it has also stuck to bluechips such as Reliance Industries, ICICI Bank, SBI, Infosys, Axis Bank and TCS, most of which are still attractively valued.

Moreover, the fund has juggled exposure to sectors such as financial services, energy, consumer goods and metals depending on market conditions. It has moved from cyclical sectors to defensive bets, such as software, in recent times.

The fund has exposure to between 55 and 60 stocks, making it quite diversified. The top 10 stocks account for only 33 per cent of its portfolio, indicating a diffused approach.

Banking remains the top sector choice of the fund and in the past one year, it has increased allocation to consumer non-durables and pharma segments as well. It trimmed exposure to petroleum products, construction projects and consumer durables.

The fund has quality bluechip stocks. In recent times, the scheme has added IndusInd Bank, Sun Pharmaceutical Industries and Sagar Cements to its portfolio. Over the past one year, the fund has exited some of the underperformers, such as PGCIL and Tata Steel. It has also exited AIA Engineering and Voltas, to name a few, as valuations soared in these counters.

Sanghvi Movers, Indian Terrain Fashions, Alembic Pharmaceuticals, PI Industries and DCB Bank are some of the multi-baggers that have helped the fund deliver strong returns.

COMMENT NOW