With the broad market performing poorly in 2018 so far and 70% of all stocks with a market capitalisation of Rs 1,000 crore or more trading in the red, most mutual fund schemes are under-performing.
Of a sample of 30 large-cap equity schemes only ten have managed to outperform the Value Research average large-cap category over a two-year period. Of the nearly 800 stocks that command a market capitalisation of over Rs 1,000 crore, more than a third have lost more than 20% since January 2018.
The under-performance seems to have taken a toll on investor sentiment because in July, the inflows into equity schemes at `9,452 crore, were at their lowest in four months.
Not surprisingly, most of the MF schemes that have done well were invested in the banking, IT, NBFC and consumer sectors. For instance, Sundaram Select Focus has invested around 37% of its corpus in banks and finance stocks with a big weightage for the HDFC twins. Again, around 45% of the portfolio of Axis Bluechip Fund is is in banks, finance and software companies;as much as 17% of the corpus is invested in the HDFC twins, shows the fact sheet as on June 2018.
Jinesh Gopani, Head (Equities), Axis Mutual Fund picking leaders or probable leaders in a particular space has been the fund’s strategy. “Private banks with a big retail presence, select NBFCs, auto, ancillaries and consumption have been in our portfolio for many years now. Moreover some good picks in the IT space have helped,” Gopani said.
Rahul Baijal, fund Manager, Sundaram Select Focus, said post-demonetisation, the fund picked up several consumer and financials stocks that had corrected but whose fundamentals were strong.
“Turning bullish on the IT sector at the start of this year and investing in some of the top names is one of the reason for the out-performance. Also, our negative call on the pharma sector helped,” Baijal said. He also reduced exposure to mid-caps to under 10% because of high valuations although the scheme allows him to to put 20% in mid-caps. Siddharth Bothra, fund manager, Motilal Oswal Focused 25 Fund, said his portfolios had given big weightages to some ‘sweet spots’. “Private banks and some consumption stocks have seen good growth and we have invested in these,” Bothra said.
Radhika Gupta, CEO, Edelweiss AMC, said the scheme held some of the heavyweights that had driven the Nifty rally. “We have some big infrastructure firms and leading private sector banks that have been a large contributor to the returns,” Gupta said. The average large-cap category of Value Research has given returns of 14.74% in the last two years, as on July 31, 2018. Of the 30 large-cap schemes, around 16 funds that have under-performed have given returns in the range of 10-14%. Typically, large-cap schemes are bench-marked against the Nifty 50 Total Returns index (TRI) and S&P BSE 100 TRI which have given two-year returns at around 16%.