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

The pace with which the equity market has rebounded in the last four months has taken everybody with surprise. This has made the equity market expensive. In the absence of a meaningful recovery in earnings, the equity market is looking expensive based on traditional valuation metrics. Frontline equity indices are trading at a valuation that we had witnessed during the dotcom bubble. Therefore, it’s a time to remain cautious purely from an equity exposure perspective. In such a situation, investing in a fund that invests in both equity and debt make sense along with enough arsenals to benefit if the market corrects. One such entity is the Tata Balanced Advantage Fund that has the mandate to invest in both equity and debt. The fund is relatively new and was launched in 2019. Nonetheless, the performance of the fund speaks for itself. In the last one year it has very comfortably beaten the category performance. Even year till date the performance of the fund has been one of the best in its category. The reason for such a sterling performance is timely asset allocation decision. In the month of March 2020, the fund was overweight on equity and reaped benefits. And at the end of July, the fund had almost 50 per cent exposure to equity and 30 per cent to debt with the rest in cash.



Such allocation will help the fund to take benefit of any correction. Besides, the fund is well-diversified, holding 58 stocks, and its top 10 holdings constitute around 35 per cent. Among equity the fund is overweight on energy and healthcare while underweight on financials. Looking at the current change in market dynamics the fund looks well-poised to generate better risk-adjusted return for an investor with investment horizon of more than three years.