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Safe gets safer
Thanks to SEBI's new categorisation norms, large-cap funds are pruning their mid- and small-cap allocations
By Research Desk | Jun 18, 2018
Large-cap equity funds have traditionally represented the safe haven for first timers or conservative mutual fund investors. Funds in this category, focusing on the bluest of blue chips, have usually contained losses well during market falls while maintaining top-quality portfolios across market ups and downs. The large-cap fund category has so far featured funds which added judicious doses of mid caps to their portfolios to spice up returns. This made cross category comparisons somewhat difficult as one had to adjust for these diversions.
But with SEBI's new categorisation norms, funds which call themselves 'large cap' have to necessarily own an 80 per cent exposure in their portfolios to the top 100 stocks by market cap. This aligns these funds more closely to their labels. The transition has caused quite a few funds to trim their mid-cap exposure or to narrow their universes.
In the last three and five years, large-cap funds have managed annualised returns of 10.4 per cent and 14.8 per cent on a trailing basis. SIP returns have been at 13.2 per cent and 13.3 per cent, respectively, for these two periods. The category remains among the largest in the equity space, with `2.63 lakh crore in assets managed as of April 30 2018.
In the funds chosen for this issue, we have captured the impact of SEBI norms on the funds' fundamental attributes and have highlighted the changes to the portfolio as a result. Please note that we have given only those funds that will remain large cap in the new framework also.
Below, you will find the links (to be published over the next few days) to the 6 recommended funds.