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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

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

CompanyFund countNet assets (%)S&P BSE 200 (%)
HDFC Bank706.965.92
Infosys614.214.81
ICICI Bank594.383.41
Maruti Suzuki562.061.69
L&T483.142.66
SBI483.221.81
Sun Pharma461.741.87
Axis Bank451.72.1
Indusind Bank441.811.37
Tata Motors401.272.8
ITC391.254.74
HCL Technologies370.941.05
Kotak Mahindra Bank371.111.89
Ultratech Cement371.020.93
Reliance Industries361.354.15

We recommend the following multi-cap funds:

  1. BNP Paribas Equity Fund
  2. Franklin India High Growth Companies Fund
  3. Franklin India Prima Plus Fund
  4. ICICI Prudential Value Discovery Fund
  5. Kotak Select Focus Fund
  6. Mirae Asset India Opportunities Fund
  7. SBI Magnum Multiplier Fund
  8. Tata Equity Opportunities Fund