Mutual Funds

Invesco India Multicap Fund: A good diversifier to spice up returns

Radhika Merwin | Updated on February 24, 2019 Published on February 24, 2019

The fund has a sound track record of picking winners in the mid- and small-cap space

With uncertainty over the general election later this year, keeping markets on tenterhooks, investors can consider multi-cap funds that invest in stocks across market capitalisation. While large-caps offer stability, exposure to mid- and small-caps help generate alpha in your portfolio (excess return over benchmark). With mid- and small-caps correcting sharply over the past year, there are pockets of opportunities emerging in these stocks; a multi-cap fund with sound performance and ability to make deft calls in the mid/small-cap space, is a good option for investors with a moderate risk appetite.

Invesco India Multicap Fund (erstwhile Invesco India Mid N Small Cap), has a sound track record of performance over longer periods. The fund delivered 17-18 per cent annual return over a five- and seven-year period and 24 per cent over a 10-year period. Of course, in its earlier avatar, being a mid- and small-cap fund, the fund has seen a higher exposure to such stocks — 60-70 per cent of its assets parked in small-cap stocks in the bull markets of 2012 and 2014.

Even in the lacklustre 2015 and 2016 market, the fund held 40-50 per cent of its assets in small-cap stocks; the breathless run in these stocks until last year aided the fund’s performance.

But since SEBI’s categorisation norms last year, the fund has morphed into a multi-cap fund, with a mandate of investing across market capitalisation. From a higher allocation to mid- and small-cap stocks in the past, the fund has over the past year re-jigged its portfolio — its assets more or less split equally across large-, mid- and small-cap stocks.

Even so, its relatively higher allocation of 60 per cent or more in mid- and small-caps last year, weighed on its performance.

However, for investors with a long-term horizon, Invesco India Multicap can act as a good diversifier, adding spunk to overall portfolio returns.




Proven track record

Even as mid- and small-caps continue to correct, there are stock-specific opportunities emerging within this space. Invesco India Multicap’s has a sound track record of performance over longer periods.

In the 2014 bull market, the fund delivered 72 per cent returns, outperforming Nifty Free Float Midcap 100 (its then benchmark) by a wide margin of 17 percentage points. In 2017 as well, the fund delivered a robust 46 per cent returns. Stocks such as VIP Industries, Redington India, ISGEC Heavy Engineering, Timken India, Vinati Organics, Tata Metaliks, Heritage Foods have been stellar performers in the fund’s portfolio between 2014 and 2017.

Some of these stocks, however, pinched the fund in 2018, as smaller stocks got hammered in the bear market. Dixon Technologies, Heritage Foods, Tata Metaliks, Rallis India, Timken India, ISGEC heavy Engineering etc, were stocks that lost 30-45 per cent, weighing on the fund’s performance in 2018.

Portfolio bets

Currently the fund holds 43 per cent of assets in large-cap stocks, 31 per cent in mid- and 25 in small-cap stocks. It has about 40 stocks in its portfolio, with exposure limited to 2-3 per cent for most stocks, barring blue-chips such as HDFC Bank, ICICI Bank and Infosys in which it has 6-9 per cent exposure.

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