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

In the last one-year the frontline equity market has almost doubled. Initially, it was IT, pharmaceutical and Reliance Industries that led from the front and later it was banking sector that took charge. Now it looks like value stocks are the new momentum stocks. A company like ITC that remained sluggish for years is witnessing renewed interest from investors and is contributing to the growth of the index. PSU stocks such as NTPC, ONGC and SBI are also showing signs of strength in recent times. A fund that is displaying a promising theme and stocks in its portfolio is ICICI Prudential Equity and Debt Fund. This is a hybrid fund that invests in both equity and debt. At the end of February 2021, the fund held 75 per cent of its asset in equity, 17 per cent in debt and the rest in cash. These debt papers have a modified duration of 0.76 years and hence even if the interest rate goes up from here on, returns from the debt portfolio will not be impacted much. Even the yield to maturity is at 6.77 per cent. The equity portfolio of the fund is on the conservative side as it holds 58.45 per cent of the net assets in large-cap stocks compared to the category average of 53.88 per cent It is well-diversified with 68 stocks.

The fund is overweight on energy and metals and underweight on financials, technology and healthcare. This has helped the performance of the fund to jump from the fourth quartile of the calendar year 2020 to the first quartile in the year to date. Going ahead, looking at the construct of the portfolio towards large-cap and value stocks along with lower modified duration, the fund is well-suited for moderate risk-taking investors with an investment horizon of at least two years.