Fund of Fortnight

Reason for recommendation

Sundaram Large and Mid Cap Fund - Direct Plan (Growth)



The recent bold move by the Finance Minister to cut corporate tax rate has created a new opportunity in the equity asset class. This tax-rate cut will directly help companies in reporting better numbers going forward, which means better returns to the investors. It is estimated that mid cap companies are likely to gain more as they are paying tax at a higher rate now. Since we are still not out of woods now, it makes sense to invest in fund that has balanced exposure to both large cap and mid cap stocks. Sundaram Large and Mid-Cap Fund, which was earlier known as Sundaram Equity Multiplier, is one such fund that has good exposure to both large cap as well as mid cap stocks. At the end of August 2019, the fund held 50 per cent of its assets in large cap stock and around 40 per cent in mid cap stocks.

This mix of stocks has already helped the fund to be one of the best in its category and also best among handful of funds that have generated positive returns in last one year. Going ahead, we expect the fund to remain an outperformer in its category and also compared to its benchmark. The current portfolio of the fund seems to be positioned in a way to take benefit of both corporate tax rate cut and not so good demand environment in the economy. Sector-wise, the fund is overweight on sectors such as FMCG, consumer durables and chemicals that are likely to perform well even when the economy is going through a rough patch. Besides, the fund is well diversified among 36 stocks with no company having weight of more than 5 per cent. Therefore, this fund is suitable for investors aiming for moderate returns with limited risk appetite.