Fund of Fortnight

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.

SBI Equity Hybrid Fund - Direct Plan (Growth) 

Reason for recommendation -

The past few months have been very good for equity investors who have received extraordinary returns. Nevertheless, with the start of September, we are seeing early signs of heightened volatility in the equity market. At the same time, the Reserve Bank of India has been active in trying to flatten the yield curve. It will simultaneously purchase and sell government bonds through two more tranches of open market operations in its ‘Operation Twist’ and ease held-to-maturity limits for bond holdings by banks. This will lead to a rally in bond prices. With uncertainty in the equity market and improving bond prices, it makes perfect sense to park money in a fund that invests in both equity as well as debt. Therefore, our pick of the fortnight is an aggressive hybrid fund, SBI Equity Hybrid Fund which has, over the last 12 months, generated return of more than 6.69 per cent. This is better than its category and even most of the equity dedicated funds in the same period. The long-term performance of the fund is also strong and has generated return of 10.79 per cent in the last 10 years. At the end of July 31, 2020, the fund held 69.66 per cent of its assets in equity, 26.91 per cent in debt instruments and the rest in cash. Even in equity the fund has major exposure to large-cap stocks and is well-diversified into different sectors. What is good about this fund is that a majority of its holding is in government securities, forming almost 15 per cent of its corpus. Going ahead the fall in bond yield and presence of some of the strong and large-cap companies such as HDFC Bank, Infosys, Divis Laboratories and Bharti Airtel with higher weightage in the portfolio of the fund will help it to generate better returns. Hence, this fund is suited for a moderate risk-taking investor with investment horizon of at least three years.

 

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