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The Big Shift

With mid- & small-caps turning volatile, mutual funds have embraced large-caps again to protect the downside

It is interesting to look at what the mutual funds do in an attempt to stay afloat in a market meltdown. For that we compared the capitalisation break-up of mutual funds in January 2008 and October 2008 to understand the shift that happened in large-cap stocks. Large-caps, as per Value Research classification, are stocks that account for the top 70 per cent of the total market capitalisation.

Of the 221 open-ended equity funds, 132 increased their allocation to large-cap stocks while 89 equity funds reduced their large-cap allocation to mid- and small-cap stocks.

Taurus Discovery, Escorts Growth, Taurus Starshare and HDFC Premier Multi-Cap are the funds that decreased their large-cap allocation the most. Alternatively, ICICI Prudential Technology, Franklin India Opportunities and Magnum FMCG increased their large-cap the most between January 2008 and October 2008.

In January 2008, when the market was bull-headed, the objective was to gain maximum and that is the reason why funds were banking on mid-caps for their 'phenomenal growth potential', but when the market lost ground and continued; funds decided to take shelter under large-caps for their relative stability. Of all equity funds, 177 had more than 50 per cent in large-cap allocation as on January 2008, compared to 138 which had more than 50 percent as on October 2008.

Shifting Focus of Fund Portfolios
  Large Cap    Inc/Dec in
Scheme   January 2008  Oct-08   Large Cap
Getting Large-cap      
Magnum FMCG 0.54 54.02 53.48
Franklin India Opportunities 47.69 91.22 43.53
ICICI Prudential Technology 5.56 47.19 41.63
Fortis Tax Advantage 34.19 70.76 36.57
DSPBR Tech.com Reg 31.78 68.16 36.38
Shift to Smaller Companies      
Taurus Discovery 50.7 0 -50.7
Escorts Growth 41.86 0 -41.86
Taurus Starshare 62.42 34.27 -28.15
HDFC Multi-Cap 62.63 36.1 -26.53
Canara Robeco Emerging Eq 23.92 0 -23.92