MF 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
The Indian equity market, after outperforming global peers for most part of the year, has started to underperform in the last few weeks. One of the reasons for such underperformance is stretched valuation of different categories of equity. In such a case, when one is not sure of which categories to invest in, it is better to stick to the judgement of fund managers. Hence, one can go for flexi-cap funds now. Flexi-cap funds can invest in any company irrespective of the firm’s market capitalisation whereas other sub-categories of equity-dedicated funds need to invest majority of their investment within the category.
DSP Flexi-Cap remains one of the best performing funds in this category. In the last three years it has given annualised return of 25.86 per cent which is better than both the category and benchmark. Even its year till date performance has remained in the top quartile. Going ahead, the fund is well-equipped to continue its performance. The fund is large-cap biased, however, and maintains a sizeable presence in the broader mid-cap and small-cap segment. More than one third of the net asset of company is invested in broader market companies.
Even in terms of sectoral allocation, the fund is overweight on financials and underweight on technology. Currently, finan- cials seem to be undervalued and at the same time the technology sector looks to be overvalued. Therefore, we believe that as the financials will do the catch-up, the fund is expected to perform better. From a risk return perspective, the fund has maintained a top quartile position. The Sharpe and Sortino ratios of the fund are 0.92 and 0.95, respectively, compared to category average of 0.85 and 0.93, respectively. The fund is suited for investors who have moderate risk appetite and are ready to invest for more than three years.
