SBI Magnum Midcap: Cherry-picking in the primary market

The fund has outperformed its benchmark by a wide margin over the last three years



Investors seeking a kicker to their equity portfolio should consider SBI Magnum Midcap, which invests at least 65 per cent into mid-cap stocks.

Over the last three years, it has delivered an average annual return of 40.4 per cent compared to the 29.8 per cent recorded by its new benchmark (Nifty Mid Small Cap 400).

Good track record

On a one-year rolling return basis, it has outdone its erstwhile benchmark (S&P BSE midcap) 97 per cent of the time in the last three years. It is one of the few mid-cap equity funds that have managed to give annualised returns in excess of 40 per cent in the last three years.

Even over a five-year period, its return (23.5 per cent) is next only to Mirae Asset Emerging Bluechip Fund and Franklin India Smaller Companies.

Cholamandalam Investment, Ramco Cements, Strides Shasun, Mahindra & Mahindra Financial and Sanofi India are its top five stocks. In the last one year, hefty returns delivered by stocks such as ITD cementation (109 per cent), Mold-Tek Packaging (92 per cent), Ramco Cements (63 per cent) and Cholamandalam Investment (50 per cent) have spiced up the fund’s returns. Va Tech Wabag and SKF India in contrast dragged performance — with these stocks correcting 20 per cent and 2 per cent, respectively, in the last one year.

During the year, the fund also made the most of the buzzing primary market. It took exposures in Equitas Holdings, Thyrocare Technologies, Narayana Hrudayalaya and Dr Lal Pathlabs and Navkar Corporation. Besides, it bought shares of VIP Industries and Sadbhav Engineering, while exiting Bajaj Finance, DCB Bank and Motherson Sumi Systems.

In terms of sectors, financial services (14.6 per cent), pharma (13.1 per cent), industrial manufacturing (9.9 per cent) and consumer goods (9.2 per cent) have had relatively higher exposures in its portfolio. It added exposure to the construction sector and software while paring exposure to private sector banks and chemicals in the last one year.

Benchmark puzzle

Last month, the fund house changed the benchmark of the fund from S&P BSE Midcap Index to Nifty Mid small 400 Index. Interestingly if S&P BSE mid-cap were considered as benchmark, the fund has underperformed it a tad bit in the last one year.

SBI Midcap gave a return of 11.1 per cent as against 7.9 per cent for Nifty Mid Small Cap 400 and 13.7 per cent for S&P BSE midcap.

The fund currently has 70.6 per cent exposure to midcaps, 9.3 per cent exposure to large-caps and 8.7 per cent exposure to small-caps.

It holds a relatively higher level of cash, at 11.3 per cent. The fund’s mandate allows it to hold cash exposure up to 30 per cent of its portfolio.

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