Large and Mid Cap Funds invest a minimum of 35% each in Large and Mid Cap stocks. Thus, the minimum investment in equities is 70%. These funds can also take some exposure to small caps and cash for the remaining 30% of the portfolio. Most funds are currently fully (over 90%) invested in equities. The category has delivered 66.21% over a one-year trailing period as on May 11, 2021. Franklin India Equity Advantage has delivered the highest return (83.99%) in this category while L&T Large and Mid Cap was at the bottom at 51.47% over a one-year period as on May 11, 2021.
Here are two funds from this category reviewed by our analysts recently.
Nippon India Vision Fund
- Star Rating: 1 star
- Analyst Rating: Neutral (direct and regular)
- Fund Manager: Kinjal Desai, Meenakshi Dawar and Sanjay Doshi
- Inception: October 1995
- Return: 70.58% (1 year), 7.86% CAGR (3 year), 10.57% CAGR (5 year), 9.70% (10 year), 17.94% CAGR (since inception). Returns of regular plan as on May 11, 2021.
- Morningstar Analyst: Kavitha Krishnan
- Date of Analysis: March 2021
- Number of Stocks: 71
- Assets in top ten holdings: 36%
- Assets under management: Rs 2,815 crore (April 2021)
- Investment Style: Large Growth
- Fund Overview
The duo of Meenakshi Dawar and Sanjay Doshi ply a growth-at-a-reasonable-price strategy. They typically scout for companies with strong and sustainable business models and are flexible with valuations, given the company’s growth prospects. They tend to take a two- to three-year view on stocks and focus on factors such as return on equity and return on capital employed when evaluating companies.
The research-orientation and qualitative overlay seeks to identify companies with strong management teams, robust business models, and sustainable competitive advantages. The managers tend to buy into stocks based on the "best
fit" for the portfolio based on its anchoring with the benchmark, both at a stock as well as sector level. The managers seek to mitigate risks by ensuring that they invest in high-quality names and keep a constant track of companies they invest in.
It is imperative to point out that the portfolio is constrained by its benchmark orientation. The managers also focus on the top-down approach. Factors such as the interest-rate scenario, barriers to entry, pricing power, policy measures, and expected consumption/spending patterns are considered when investing. They use the internal model portfolio as an initial reference point while constructing the portfolio and also take into consideration analyst recommendations on this fund. The focus is on trying to reduce the volatility and building a stable long-term portfolio.
ICICI Prudential Large & Mid Cap Fund
- Star Rating: 3 stars
- Analyst Rating: Bronze (regular plan), Silver (direct plan)
- Fund Manager: Sankaran Naren, Prakash Gaurav Goel & Priyanaka Khandelwal
- Inception: July 1998
- Return: 73.01% (1 year), 10.21% (3 year), 13.75% (5 year), 12.34% (10 year), 17.92% (since inception). Return of regular plan as on May 11, 2021
- Morningstar Analyst: Nehal Meshram
- Date of Analysis: March 2021
- Number of stocks: 68
- Assets in top 10 holdings: 44%
- Assets under management: Rs 3,764 crore (April 2021)
- Investment Style: Large Blend
- Fund Overview
The managers follow a disciplined investment process with a mix of value and growth styles. With mostly a large-cap bias, they evaluate sectors from a top-down perspective, favouring those with attractive fundamentals and shifting away from ones where they think valuations are stretched. Within the sectors, they use relative valuation parameters to invest in stocks that are attractively priced relative to their growth prospects.
Companies favoured by the investment process typically display quality management, strong financial strength, and growth prospects. The resulting investment style can be best characterised as having a slight growth tilt. Considering Naren’s style of investing, it isn't uncommon for him to trade aggressively and buy/sell stocks from the same sector based on relative valuations.
With the fund's countercyclical approach, he looks to safer stocks during the turmoil, and as the sector outlook improves, he moves into riskier stocks. We believe that as long as Naren helms this fund, he can make the process work. But given that Prakash Goel manages a significant allocation to mid-cap stocks, which are relatively risky, it could witness big declines in returns if not picked up carefully.
