Category Watch
A bit of everything
Multi-cap funds allow you to benefit from the growth of companies of different sizes. Fund Managers can also change allocations between large and small companies thereby reducing risk
06-Oct-2016
Multi-cap funds, in recent years, have emerged as the go-to category for the first-time investors in equity funds. After all, large-cap funds play it too safe and mid-cap funds, which offer high returns, can subject you to nasty jolts in a roller-coaster market. Multi-cap funds offer a bit of both. The five-year return on multi-cap funds is 13.6 per cent against 11 per cent on large-cap funds.
The popularity of the category has also seen a burgeoning number of funds taking to a multi-cap strategy, with 70 such funds managing a collective Rs 1.11 lakh crore as of end July 2016. With mid-cap stocks shooting through the roof, multi-cap funds have delivered excellent returns lately, with a three-year CAGR of 23.4 per cent and a five-year CAGR of 13.6 per cent. With a three-year return of 17 per cent, SIPs have underperformed lump-sum investments over three years as the markets bounced sharply from their lows in 2013. Five-year SIPs are still ahead of lump-sum investments, with a 17 per cent return.
While multi-cap fund mandates were quite fluid earlier, the category toppers featured here have fairly watertight mandates as to how much of their portfolio they will allocate to large-cap, mid-cap and small-cap stocks. Most of them favour a large-cap tilt and have very marginal allocations to small-cap stocks with a view to containing risk. They also refrain from making sharp tactical swings in their allocations based on market conditions as this requires an element of timing.
Most-popular stock holdings
| Company | Fund count | Net assets (%) | S&P BSE 200 (%) |
| HDFC Bank | 70 | 6.96 | 5.92 |
| Infosys | 61 | 4.21 | 4.81 |
| ICICI Bank | 59 | 4.38 | 3.41 |
| Maruti Suzuki | 56 | 2.06 | 1.69 |
| L&T | 48 | 3.14 | 2.66 |
| SBI | 48 | 3.22 | 1.81 |
| Sun Pharma | 46 | 1.74 | 1.87 |
| Axis Bank | 45 | 1.7 | 2.1 |
| Indusind Bank | 44 | 1.81 | 1.37 |
| Tata Motors | 40 | 1.27 | 2.8 |
| ITC | 39 | 1.25 | 4.74 |
| HCL Technologies | 37 | 0.94 | 1.05 |
| Kotak Mahindra Bank | 37 | 1.11 | 1.89 |
| Ultratech Cement | 37 | 1.02 | 0.93 |
| Reliance Industries | 36 | 1.35 | 4.15 |
We recommend the following multi-cap funds:
