4 funds that got my attention

Aug 10, 2022
Senior Research Analyst Kavitha Krishnan picks up four funds, across four categories, and four fund houses, to discuss.

SBI Bluechip

Watch the video where I briefly speak on the fund

Performance: The fund has remained a consistent performer across years. However, it fell in the bottom quartile in 2018 and the third quartile in 2019 and 2021. This impacted the fund’s long-term performance. Given the fund’s quality bias and significant mid-cap exposure, the fund can tend to underperform in momentum driven markets.

Fund Manager: Sohini Andani has been managing this fund since September 2010 and has been associated with the fund house since 2007. Her bent on research and focus on bottom-up stock picking stands out in her research process.

Portfolio: This fund carries a very low turnover, with the manager investing for the long-term, with an investment horizon of over 3 years. Andani invests in a high conviction portfolio of around 60 stocks with the top 10 stocks constituting around 47% of the portfolio.

Aditya Birla Sunlife Mid Cap

Watch the video where I briefly speak on the fund

Read the fund analysis

Performance: Multiple manager changes have dented the fund’s long-term performance given that the individual managers plied their distinctive styles while managing this fund. The fund has also witnessed a significant underperformance during the period between 2018 and 2020, before posting a 2nd quartile performance in 2021. While a higher allocation to cash likely impacted performance in 2018, the increased valuations and the volatility impacted the fund’s performance across these years.

Fund Manager: The fund was incepted in 2002. Despite the fund manager changes, the core philosophy of the fund has remained intact, and the mandate has been followed consistently. Anil Shah has been managing this fund since May 2020. He is a very capable manager and has the wherewithal to manage the fund in an efficient manner. We have a positive view on Anil Shah and think that his investment style is extremely well thought out. He has been associated with the AMC for over 10 years and also manages their flexi-cap strategy.

Portfolio: The manager plies a buy and hold strategy that is diversified across stocks and sectors, thereby reducing stock specific risks. The aim is to invest in companies with product lines that could potentially turn them into multi-baggers. The manager tries to diversify the portfolio across 50-70 names. Weights are typically capped at 3% despite the mandate allowing the manager a leeway of +/-3% versus the benchmark on individual stock positions and +/- 4% at a sector level. The manager can tend to hold slightly higher levels of cash based on the market movements.

HDFC Small Cap 

Watch the video where I briefly speak on the fund

Read the fund analysis

Performance: The manager has been able to tide over volatile markets based on his stock picks. However, the fund underperformed significantly in 2015 and 2016 owing to their exposure towards PSU names like Allahabad Bank, Punjab National Bank, Union Bank, Indian Bank and Bank of Baroda. The performance turned around in 2017 as these stocks posted positive performance. The fund has also meted out a positive showing in 2018 but logged a bottom quartile performance in 2019 and 2020 before posting a second quartile performance in 2021.

Fund Manager: The fund is managed by Chirag Setalvad. We have a high level of conviction on Setalvad and think that he can manage the fund in good stead. He stands out in terms of being amongst the best managers in the industry especially within the small and mid-cap segment and has plied a consistent approach on this fund since 2007.

Portfolio: Setalvad’s willingness to adhere to the fund’s small-cap nature across market conditions is noteworthy. The manager’s buy-and-hold approach leads to a low turnover on the fund. The fund has remained focused on the small-cap segment and a lot of the manager’s holdings like Indian Bank, Persistent Systems, Aurobindo Pharma, etc. have remained in the portfolio for over 5 years. Some of his holdings have grown into large caps/mid-caps. He typically looks at rebalancing the portfolio when he finds the right ideas to invest in. Setalvad will only invest in stocks when ideas seem attractive from a quality as well as a valuation standpoint. Having said that the fund’s holding pattern could lead to a slightly higher liquidity risk on the fund as compared to its mid cap peers.

Kotak Standard Flexi Cap

Watch the video where I briefly speak on the fund

Read the fund analysis

Performance: A slightly conservative approach and benchmark-consciousness may constrain the fund’s performance to some extent. The fund’s performance has suffered in 2020 and 2021, which impacted the fund’s cumulative showing across time periods. A momentum driven market led to some loss of alpha on the fund. The manager’s underexposure towards metals and mining also hurt. The fund’s small and mid-cap exposure can have a significant impact on its performance.

Fund Manager: Harsha Upadhyaya is a very capable manager and has the backing of a strong and well experienced team. The fund’s execution is reflected in its performance under its current manager. The investment process is well-defined and has been executed well under Upadhyaya’s lead.

Portfolio: The portfolio consists of about 55 stocks with the top ten holdings accounting for around 55% of the portfolio. The fund is a high growth low momentum strategy, and this is evident in the manager’s style of investing. Turnover numbers on the fund are on the lower side and inflows are typically deployed into buying more of existing stocks rather than investing into new names.

This is the largest fund in its category and is also currently the largest equity fund in the market. Although the mandate allows it a lot of flexibility and the approach that is followed mitigates concentration and liquidity risks, we think that it is important to monitor the fund’s growth and the impact of its size on the overall execution of the strategy. Moreover, the fund’s small and mid-cap exposure can have a significant impact on its performance. It is important to remember that the fund’s success largely hinges on the manager’s ability to allocate across market caps and pick the right stocks.

Add a Comment
Please login or register to post a comment.
© Copyright 2024 Morningstar, Inc. All rights reserved.
Terms of Use    Privacy Policy
© Copyright 2024 Morningstar, Inc. All rights reserved. Please read our Terms of Use above. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
As of December 1st, 2023, the ESG-related information, methodologies, tools, ratings, data and opinions contained or reflected herein are not directed to or intended for use or distribution to India-based clients or users and their distribution to Indian resident individuals or entities is not permitted, and Morningstar/Sustainalytics accepts no responsibility or liability whatsoever for the actions of third parties in this respect.
Company: Morningstar India Private Limited; Regd. Office: 9th floor, Platinum Technopark, Plot No. 17/18, Sector 30A, Vashi, Navi Mumbai – 400705, Maharashtra, India; CIN: U72300MH2004PTC245103; Telephone No.: +91-22-61217100; Fax No.: +91-22-61217200; Contact: Morningstar India Help Desk (e-mail: helpdesk.in@morningstar.com) in case of queries or grievances.