Fund of Fortnight
This is our mutual fund recommendation. Every fortnight , we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same
Reason for recommendation
Nifty Consumption, an index that tracks and reflects the behaviour and performance of a diversified portfolio of companies representing the domestic consumption sector, has mostly underperformed major indices and categories in the last one year. Nevertheless, for a longer horizon, they are one of the best performing categories. Going ahead, they are going to do a catch-up and may outperform. This will become more promi- nent if there is any market correction as investors increase exposure towards these sectors.
Tata India Consumer Fund, which invests in the consumption theme, remains one of the best funds from this category. It has generated annualised return of 22.83 per cent in the last five years, highest in its category. What also favours this fund is its lower volatility. The fund commands one of the lowest standard deviation in its category. In a volatile market it makes lot of sense to invest in a fund with lower standard deviation and beta. The fund has lower beta compared to its category. In terms of portfolio, the fund holds 32 stocks from sectors such as FMCG, consumer durables, services, automobiles and chemi- cals.
It is overweight on FMCG, which forms 50 per cent of the total portfolio. Out of its top five holdings, four companies are from the FMCG sector. Overall, the strategy adopted by the fund is to invest in large-cap stocks with growth as a factor. In the current situation sticking to large-cap makes sense. This is a thematic fund and hence only a tactical allocation should be done. It also carries a higher risk than a well-diversified fund but gives better return potential at the current juncture. Hence, this fund is suitable for only those investors that have higher risk appetite and are willing to hold the investment for three to five years.
