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

While equity indices all over the world are recovering from their March lows, some of the global indices are already at a kissing distance from their January high. The Indian equity market, although lagging, is no different and has gained considerably in the month of May. The best part is that the broader markets are also participating in the gain. From the month of May, the fall in Nifty Mid-Cap is lower than the Nifty. This shows that mid-caps are finally inclined to gain after a huge underperformance to frontline indices in the last couple of years.

Against this background, investing in a mid-cap fund makes perfect sense. The Tata Mid-Cap Growth Fund is one such mid-cap-dedicated fund, which is just the perfect candidate for investment. It has invested 66.21 per cent of its corpus in mid-cap stocks, 14.84 per cent in small-caps and the rest in large-caps. The good part of the fund is that it has outperformed its benchmark in the falling markets of 2018 and 2011 and the rising markets of 2014 and 2017. Even on YTD basis, the fall in NAV is much lower than its benchmark and peers.

Going forward, Tata Mid-Cap Growth Fund is well-poised to beat its benchmark with its well-diversified portfolio. As of April 30, 2020, the fund held 44 stocks, wherein the top 10 stocks held 37.32% of the corpus. Moreover, the fund is overweight on the chemicals, FMCG and the services sectors, which are likely to perform better in the near future. At the same time, it is underweight on financials. Hence, this fund is well-suited for a risk-taking investor with an investment horizon of more than three years.