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Investors looking to implement a value-investing strategy to overcome the current market choppiness can consider investing in L&T India Value. The fund has a healthy long-term record within its category, though the recent performance has been tepid. Though it has slumped 11 per cent over the past year, over the long run, the fund has delivered healthy returns.
For instance, over the past three- and five-year periods, it has clocked annualised returns of 14 per cent and 21 per cent, respectively, placing it among the top quartile among value funds.
Along with value-investing, the fund takes a multi-cap approach that provides it with the flexibility to unearth value picks across market caps and tweak allocations according to the market conditions.
The fund’s peers in this category — Tata Equity P/E, Templeton India Value and JM Value — have also delivered negative returns over the past year.
This could be due to high allocation towards mid-caps which have taken a hit over the past year. Investors with a moderate risk appetite and three to five-year horizon can consider investing through the Systematic Investment Plan (SIP) route in L&T India Value.
Portfolio and strategy
L&T India Value is basically a multi-cap fund that shifts allocation between large- and mid-cap stocks. The fund adopts a bottom-up approach in stock selection at reasonable valuations.
Also, it invests in stocks with an adequate margin of safety to limit downside risks in volatile markets. The fund has about 30 per cent of its portfolio in the mid-cap segment, while the balance is in large-caps. A tiny portion is allocated to small-caps (7.5 per cent). At this juncture, although mid-cap allocation appears to be on the higher side, it is well-diversified. The fund holds about 78 stocks in its kitty.
The top three sectors — financial, construction and software — constitute 53 per cent of the portfolio, and the top five stocks constitute 25 per cent. Also, barring a few top holding stocks, the allocation towards other individual stocks is less than 2 per cent, mitigating portfolio risk.
Both banking and finance constitute about 28 per cent of the allocation. Software, petroleum products and pharma sectors are the other key sectors the fund bets on. It is currently overweight on construction, pharma, chemicals and services sectors compared with its benchmark, while continuing to be underweight on financial, software, energy and FMCG. Reliance, Infosys, ICICI Bank and Axis Bank are the top preferred stocks and have delivered good returns over the past year. On the other hand, the underperformance in the automobile and construction stocks — Mahindra & Mahindra, MRF, The Ramco Cements and Oberoi Realty— have dragged the fund’s performance.
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