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Fund of Fortnight

Fund of Fortnight

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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 recommendationIn the last year we have witnessed the broader market having a dream run. It has outperformed the large-cap index by a mile. While large-cap-dedicated mutual funds schemes are up by 58 per cent in the past 12 months, mid-cap and small-cap-dedicat-ed funds are up by more than 80 per cent and 100 per cent, respectively. The broader market-dedicated funds by their structure and nature should give better returns than large-cap funds in the long run. Nonetheless, the pace with which they moved up calls for caution. Hence, currently, we suggest you to invest in large-cap-dedicated funds.

One of the large-cap dedicated funds that are true to their label is ICICI Prudential Bluechip Fund, which has invested 92 per cent of its net assets into large-cap stocks as of end of May 2021. The fund is well-diversified and holds around 59 stocks and is benchmarked to Nifty 100 TRI. Therefore, the sector weightage of the fund will be reflecting its benchmark with a slight deviation. At the end of May 2021, the fund has been slightly overweight on financials, which have lagged in performance in recent times. Hence, if financials do catch up going forward, the fund will be able to give a better performance than its benchmark. What also is in favour of the fund now is its quality bias while selecting stocks. In the current scenario when almost all the indices are trading at lifetime highs, the froth may have built up and therefore a quality portfolio is ideal in such a situation. The fund is not expected to outperform the frontline indices by a huge margin; however, chances are low that it will underperform. Hence, this fund is suitable for moderate risk-taking investors with investment horizon of more than three years.

 

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Amalgamation is expected to enhance the valuation of BPCL bound for privatization but rising fuel prices may act spoiler.

Shreya Banthia / Article rating: 5.0

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