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.
Union Large & Midcap Fund - Direct Plan (Growth)
Reason for recommendation :
As of now, the Indian equity markets are looking jittery at a higher level. After rising by more than 40 per cent from their recent lows, frontline equity indices are finding it difficult to cross some of their key resistance zones. One of the reasons is the uncertainty over the recovery of the economy due to the corona virus-driven pandemic. In such circumstances, the mutual fund categories that make sense now are large-caps and mid-caps. These schemes are less risky than pure mid-cap schemes and small-cap schemes as they have exposure to large-caps. They need to have minimum 35 per cent exposure to mid-cap stocks that make them riskier than large-cap schemes. One of the funds from this category that has performed exceedingly well during this difficult time is Union Large & Mid-Cap. The fund has completed just six months but in this short duration it has outperformed its peers and benchmark in almost all the periods. In the last six months the benchmark and category average have been down by 11 per cent compared to just 5 per cent by the fund. The volatility of the fund is in line with its benchmark. Better return with similar volatility has helped the fund post a good Sharpe ratio.
What has triggered the fund to perform is its robust portfolio. At the end of June 2020, the fund was well-diversified with 51 stocks. Nonetheless, the concentration at the top level has helped it to outperform in difficult times. The top four holdings form almost 27.5 per cent of the total corpus and are those stocks that are currently leading the rally. Looking at the portfolio, we believe that the fund is likely to continue its good run. If you have a long-term horizon and are willing to take a little extra risk, you may invest in this fund.
