Fund Call. Tata Large & Mid Cap: Healthy returns in the long run

Investors looking to tap outperforming large-cap stocks along with growth-oriented mid-cap stocks can buy units of Tata Large & Mid Cap.

As the equity benchmark indices, the Sensex and the Nifty, scale new highs, driven by large-cap stocks, investors who missed participating in the rally can opt to invest in the equity-oriented, large- and mid-cap funds category, which is a new classification as per regulations launched by SEBI.

In this category, the fund has the flexibility to invest in both large- and mid-cap companies, each in the range of 35-65 per cent of the total assets.

Over the past one year, Tata Large & Mid Cap has delivered a 15.1 per cent return, outshining the benchmark index S&P BSE 200 TRI’s return of 12 per cent, as well as the category-average return of 10 per cent.

Though the fund has marginally underperformed its benchmark over the past three- and five-year periods, it has delivered above-category-average returns of 13.3 per cent and 9.5 per cent, respectively.

The scheme has outperformed its peers such as LIC MF Large & Mid Cap and Edelweiss Large and Mid Cap in the past one-year period. Investors can also opt to invest through the systematic investment plan (SIP) route with a minimum holding period of five years, so that they can reap the complete benefit.

Portfolio

With a prime focus on long-term capital appreciation, the fund invests in a blend of well-researched large- and mid-cap stocks of both value and growth companies.

It bets on fundamentally good stocks and stays invested over medium-to-long term. Tata Large & Mid Cap has about 60 per cent of total assets in large-cap stocks and 38 per cent in mid-cap stocks, while only 2 per cent goes into small-cap stocks.

Performance

The fund does a five-point evaluation of stocks before adding them to the portfolio — efficiency in use of capital, governance levels, earnings growth prospects, valuation and liquidity.

Also, it actively manages stock- picking, using a bottom-up approach for portfolio construction. As much as 95 per cent of its assets are allocated to equity, the balance is invested in debt, namely in repo instruments.

Following a lacklustre performance in 2016 and 2017, the fund limited the downside well in 2018. In 2019, it has delivered good returns. It is placed in the top quartile of the large- and mid-cap category, over the past one year.

It has the highest exposure to the banking sector, with 30 per cent allocation, which includes a mix of public and private sector banks such as SBI, ICICI Bank, HDFC Bank and Kotak Mahindra Bank.

Over the past year, banking stocks have been performing well, boosting the fund’s NAV. After a long gap, the fund re-entered the auto-ancillary sector this July, and maintains its allocation to the automobile sector.

It has upped its allocation to pesticides, petroleum products and debt over the past six months, while trimming exposure to software and consumer non-durables. Tata Large & Mid Cap holds 33 stocks. Its portfiolio churn is less.

Over the past six months, it added the stock of Sundram Fasteners and Hindustan Unilever and exited to GlaxoSmithKline Consumer Healthcare. Bluechip stocks such as TCS, RIL, HDFC and L&T have given stability to the portfolio.

COMMENT NOW