With mid- & small-caps turning volatile, mutual funds have embraced large-caps again to protect the downside
09-Dec-2008 •Research Desk
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.