A Look At The Best And Worst Large-Cap Funds
The bulls are taking the markets to new highs, are your fund managers doing so?
The Sensex has hit an all-time high, and the Nifty followed. But what about your mutual fund? To be specific, your large-cap funds.
The analysis based on the last five months' performance may be subjected to criticism and dismissed as "a fund's performance should be looked at from a long-term perspective". This analysis is for those who have held these funds over the last five, 10, 15 years or whatever is defined as 'long-term'. It’s a good-to-know and a need-to-know that could tell you if your fund manager moved into the right stocks at the right time! More of this later, but first, the big numbers.
The Sensex hit an all-time high last week. From its 52-week low (June 17, 2022), it has given a return of 21%. Nifty has also given a similar return. The S&P BSE 100 came in close at 20.9 %. The Bank Nifty gained 31%, making it the key driver of the current rally.
The Two Best And The Two Worst
There are 28 large-cap funds based on AMFI data that are comparable. Of the 28 funds, only two have outperformed the Sensex and Nifty by a decent margin – Nippon India Largecap Fund and Taurus Largecap Equity Fund.
Seven funds underperformed, with returns ranging from 17% to 19%. Franklin India Bluechip Fund and Axis Bluechip Fund were the worst of the lot, giving a return of just about 17%, each. The rest of them made it to the finish with returns ranging from 20% to 21%, while the HDFC Top 100 nudged ahead of the benchmark with a 22% return.
So What Worked For The Top Two
Nippon India’s Large Cap Fund's focused investment in banking and financial services helped them beat the rest. The fund manager has put 33% of the corpus in banking and financial services. Banking alone accounts for 22 %. This is consistent with the key indices' composition, which is dominated by banking and finance (33%).
Taurus has an even more aggressive strategy that has helped beat the benchmarks — just two banks viz. ICICI Bank Ltd. and Kotak Mahindra Bank Ltd. under banking and Mahindra & Mahindra Ltd. under automobiles. Though categorised under large caps, Taurus simply picks up blue chips that tend to gain faster in consumption and banking while avoiding cyclicals, which tend to depress returns.
What Did Not For The Bottom Two...
Axis Bluechip’s underperformance of the benchmarks by giving 17 % returns, is a bit surprising given that it has 38% of its holdings in financial services. It is possible that their holdings in I.T. (11.6 %) and Reliance Industries Ltd. (3.7 %) could have dented the returns.
The other laggard, Franklin Bluechip, has an exposure of 5.6% in Reliance Industries. This could have pulled down the rest of the fund, as Reliance gave a return of just 1%.
The tables will tell us the story of the short-term performance of the funds.
But what about long term performance? In our next series we will take a deep dive into each of these funds over a period of time and see where they stand.
Stay tuned to BQ Prime.