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

PGIM India Midcap Opportunities Fund - Direct Plan

Reason for recommendation
The last one year has been phenomenal for the broader market-dedicated funds. They continue to outperform large-cap stock-based funds. Many believe that the recent second wave of the corona virus will put a break to their performance and may see a correction. Nevertheless, there was a temporary blip after which they recovered and funds from this category on an average have generated returns in doubledigits. Many experts believe that despite such outperformance, mid-cap stocks are not trading on extreme valuation. Hence, investors with investment horizon of 3-5 years can take exposure to a good quality mid-cap fund.

PGIM India Mid-Cap Opportunities Fund is one such fund that has generated return in excess of 100 per cent in the last 12 months and even in the periods of the last six months and three months it has remained in the first quartile. One of the reasons for such performance is larger exposure to broader market stocks. It was reported to have invested 73 per cent in mid-cap stocks and 16 per cent in small-cap stocks at the end of April 2021 while large-cap stocks form about 10 per cent of the portfolio. This makes the fund a little bit risky as reflected in its standard deviation, which is on the higher side and one of the highest in its category.

Nevertheless, the risk taken is well compensated by the returns it has generated as seen through its higher Sharpe ratio, which is once again the highest in the category. Going ahead, the fund is likely to continue its performance with its well-diversified portfolio of 48 stocks and not a single company has weightage of more than 5 per cent. As of April 30, 2021, the fund is overweight on engineering, services and technology sectors. These are the sectors that are likely to keep up their performance as the economy opens and more and more companies adopt digital transformation. The fund is suitable for aggressive investors with investment horizon of more than three years.