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In the current market scenario, investors with a moderate risk appetite can opt for funds with exposure to both large- and mid-cap stocks. Funds under the Large- and Mid-Cap Fund category under SEBI’s new norms offer just the solution. Canara Robeco Emerging Equities, a former mid-cap fund, has now become a large- and mid-cap fund. The fund, which had predominantly been investing in mid-cap stocks, has seen a notable shift in its portfolio in recent months, with increased exposure to large-cap stocks.
As per SEBI’s directive, large- and mid-cap funds have to invest at least 35 per cent each in such stocks, which could have some bearing on the performance of this fund. Nonetheless, given the strong track record in the past, thanks to its right sector and stock picks, it is likely to do well in its new avatar as well.
Investors can consider investments with a moderate-to-high-risk appetite looking to invest in a blend of large- and mid-cap stocks can consider it.
It has delivered an annualised return of 20.9 per cent over the past 10-year period, and remains in the top quartile of funds, despite recent underperformance. Over the past one-year period, the fund has given 15.5 per cent against the benchmark index return of 19.15. Nonetheless, it has comfortably beaten its benchmark over the past three- and five-year periods by clocking 18.8 and 35.4 per cent returns, respectively. Moreover, the fund has outshone its peers such as Sundaram Large and Mid Cap, Principal Emerging Bluechip and Invesco India Growth Opportunities in these time-frames.
Portfolio and strategy
Trimming its small-cap exposure, the fund recently upped its large-cap allocation to fit into the category. It follows a combination of growth and value strategy. With a growth-at-reasonable-price (GARP) investment philosophy, the fund adopts a bottom-up approach in stock-picking.
It holds about 66 stocks in the portfolio. Barring a few top holding stocks, allocation to individual stocks is diffused — less than 2 per cent. Similarly, the fund diversifies its sector allocation across 23 sectors, and the top four sectors constitute about 45 per cent of the total allocation. Recently, the fund reduced allocation to banks and automobile sectors, while increasing exposure to finance space. For instance, it recently increased its allocations to stocks such as Bajaj Finance and Mahindra & Mahindra Financial Services, while booking profit and exiting IndusInd Bank and Kotak Mahindra Bank stocks. LIC Housing Finance and L&T Finance Holdings made entry into the portfolio. The fund also holds stocks that have yielded good returns for the long term, such as Atul, Ramco Cements, Dalmia Bharat and Whirlpool of India.
Strong performance of large-cap stocks, namely ITC, Reliance Industries, Bajaj Finance and Britannia Industries, adds stability to the portfolio.
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