Mutual Funds

Tata Large and Mid Cap Fund: Balancing stability with growth

Yoganand D BL Research Bureau | Updated on March 06, 2021

Over the past year, the fund has delivered 35% against the category average of 32.4%

Investors looking to play the economic recovery theme with the right mix of steady large-caps and growth-oriented mid-caps can consider buying the units of Tata Large and Mid Cap, a long-term steady outperformer.

One can opt for the systematic investment plan (SIP) route to mitigate risks from market volatility with a minimum holding period of five years.

As the Indian economy gathers steam, well-balanced portfolios comprising large- and mid-cap stocks would be the ideal recipe for returns.


Large-caps will offers earnings stability while mid-caps will provide business growth.

Before SEBI came up with regulations on categorisation and rationalisation of mutual fund schemes, the fund was a multi-cap offering known as Tata Equity Opportunities that maintained 65 per cent of its allocation to large-cap stocks. As a large- and mid-cap fund now, it keeps a 55-60 per cent exposure to large-caps and 35-40 per cent exposure to mid-caps.

It has out-performed almost all category peers and benchmark Nifty LargeMidcap 250 TRI since June 1, 2018, when it became a large- and mid-cap scheme.

Over the past one year, the scheme has delivered 35 per cent return against the category average return of 32.4 per cent. It has delivered above-category-average returns of 13 per cent and 15.8 per cent over the past three- and five-year periods, respectively.

However, the fund has lagged the benchmark in the past 12 months, possibly due to the sharp rise in mid-cap index constituents.

Portfolio and strategy

Tata Large and Mid Cap practices growth at reasonable price, with a focus on active management of stocks picked using the bottom- up investing style. It aims to invest in fundamentally good stocks, over the medium- to long-term horizon, that exhibit efficiency in use of capital, high governance levels, robust earnings growth prospects, decent valuation and good liquidity.

As a large- and mid-cap fund now, the scheme has consciously maintained minimal exposure to small-caps (2-5 per cent) compared with a few peers that maintain 10-20 per cent allocation. This, in our view, makes Tata Large and Mid Cap a safer fund, and comes handy during years such as 2020, when it contained the downside better than the benchmark index.

The fund has one of the lowest portfolio turnovers among peers, a direct consequence of its strategy of identifying turnaround opportunities that can be later re-rated.

Apart from the core set, the fund also goes after tactical opportunities in businesses that meet certain basic criteria, and offers valuation comfort and earnings growth.

In terms of sectoral exposure, Tata Large and Mid Cap’s biggest allocation is in the banking sector (24.5 per cent) spread over a basket of private and public sector banks, namely ICICI Bank, HDFC Bank and SBI.

The banking sector offers an interesting play on consumption and capex revival themes. Other top sector holdings are consumer non-durables, software and petroleum products.

Stocks such as Reliance Industries, TCS and Varun Beverages have yielded good returns over the past one year, boosting the fund’s performance.

The scheme holds 36 stocks wherein the top 10 account for 54 per cent of the portfolio. The fund is overweight on financials, energy, FMCG and chemical sectors, while being underweight on software, healthcare and automobile sectors.

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Published on March 06, 2021
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