SBI Magnum Multiplier: Large-caps give it safety during volatility

With markets continuing to remain volatile, funds that have a large-cap tilt are among the best choices for risk-averse investors. SBI Magnum Multiplier is one such fund. Over one-, three- and five-year periods, Magnum Multiplier has outperformed its benchmark, the BSE 200, by a convincing margin of 5-20 percentage points. It has also fared better than peers, such as L&T Equity, HDFC Top 200 and Canara Robeco Equity Diversified in these timeframes.

Fund strategy Across market cycles, Magnum Multiplier holds large-cap stocks (those with market cap of ₹10,000 crore and above) to the extent of 80-85 per cent of its equity holdings. While the fund does take a bit of exposure to mid-cap stocks to boost returns, it keeps risks lower by not pushing mid-cap holdings beyond 15-20 per cent, even during mid-cap led rallies.

The fund is also adept at tweaking its asset allocation and sector choices in tune with market conditions. For example, in the falling markets of 2011, the fund remained cautious by holding 90-95 per cent in equities and the rest in debt and cash.

But it was quick to catch wind of the rally that followed in 2012. Equity allocations moved up to 98 per cent by February 2012 itself. Again, while it stepped up on cyclical sectors, such as automobiles, in the 2014 rally, in volatile phases such as the one we are currently witnessing, it has increased exposures to defensives, such as pharma and consumer non-durables.

A steady large-cap exposure and timely changes in asset and sector allocations help the fund contain losses better than the benchmark in falling and volatile markets.

At the same time, a smattering of mid-caps along with its ability to sense the change in market direction quickly helps the fund beat the benchmark during rallies.

Current portfolio The fund is currently invested about 96 per cent in equities, of which 20 per cent are mid-caps. Though mid-caps have run up quite sharply in the last one year, the fact that the fund holds quality, names such as SKF India and Cyient, provides comfort.

The fund is also betting on the turnaround in the infrastructure/construction space through mid-cap names, such as Sanghvi Movers and Ahluwalia Contractors. With auto stocks having had a good run in the last one year, it has exited stocks with muted near-term prospects, such as Mahindra & Mahindra. Also, it recently sold its entire stake in power sector players Alstom India and PTC.

In tune with its preference for the pharma space, it entered Sun Pharma and Aurobindo Pharma recently.

The fund also seems to be betting on urban consumption growth through Jubilant FoodWorks. Banks and software are the preferred sectors.

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