Why has Motilal Oswal's flexi-cap fund been flying high?

Motilal Oswal’s Flexicap Fund has a concentrated strategy, which is different from most other flexi-cap funds.

At a time when most mutual funds spread their bets across dozens of stocks for diversification, Motilal Oswal’s Flexicap Fund is following a different path—one that’s focused with high-conviction.

With nearly 67 per cent of its assets concentrated in just the top 10 stocks, the fund has one of the most compact portfolios in the industry. As of May, it held only 21 securities. While such a tight structure might raise eyebrows, for Niket Shah—CIO at Motilal Oswal Mutual Fund and fund manager—this is no accident. It’s a strategy born of deep research.

“This isn’t something that happened on day one,” Shah clarifies. “(While) that's by design, it’s also a result of strong compounding. Some of these stocks have increased in value by 5x or even 10x, so mark-to-market gains have also contributed significantly to the current concentration.”

One-year performance

And the performance numbers back that conviction. Over the past one year, the Motilal Oswal Flexicap Fund has delivered a return of 14.5 per cent—more than double the flexi-cap category average of 6 per cent. The fund currently holds the top spot in the flexi-cap category.

The fund is co-managed by Ajay Khandelwal, Atul Mehra and Rakesh Shetty, but its investment style is anchored in clarity of thesis and confidence in long-term earnings growth. Many of the fund’s top holdings, Shah explains, offer strong visibility of 20–25 per cent earnings growth even in a challenging macro environment—enough to double profits every two-and-a-half to three years.

Stress on quality management

The team’s confidence doesn’t stem just from financial metrics. A key filter is management quality. “A lot of that also depends on the quality of management, which we place great emphasis on, sometimes even more than the quality of the business itself,” says Shah.

But a concentrated approach also demands sharper risk controls. Shah explains that their risk management is rooted in agility and discipline. The fund is quick to cut exposure when a stock no longer fits the original thesis. “If a stock no longer aligns with our original thesis or growth projections, we exit—even at a loss. For us, capital preservation is more important than holding onto a mistake,” he says.

This contrasts with the more widely adopted diversified strategy, where risks are spread across a larger number of stocks and sectors. Diversification can soften the impact of any single stock’s underperformance, but it can also dilute the effect of winners. The trade-off lies between the potential for outperformance and the consistency of returns.

Motilal Oswal clearly leans toward the former. “The upside of being early—you’re able to anticipate how earnings will evolve, and when it plays out as expected, you generate outsized returns on capital,” says Shah.

For investors, the takeaway is nuanced: concentrated investing isn’t for everyone. But when backed by discipline, deep research and a clear framework, it can deliver meaningful long-term results—even if the ride gets bumpy along the way.

Also read: HDFC Flexi Cap: 5 most-bought stocks. Do you own any?