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 impact of the spread of the corona virus pandemic and subsequent lockdown is clearly visible in the recently released high-frequency data and quarterly results of companies. The situation is going to get worse before it improves. In such a scenario, a practical equity strategy is to invest in schemes that have high exposure to blue chips or large-cap companies. The reason being their strong balance-sheet, brand power and market share, which will help them to navigate the current condition in a better way. SBI Bluechip Fund is one of such funds dedicated to large-cap. As the name suggests, large-cap mutual funds invest in very large companies or top 100 companies by market capitalisation. Looking at its portfolio, the fund holds 84 per cent of its corpus in large-cap companies compared to 79 per cent by the category at the end of March 2020. Besides, the fund also has larger exposure to the FMCG sector compared to its category. FMCG provides stability in a volatile market condition. Nestle India and ITC from this sector are in the top five holdings of the fund. In addition to FMCG, it has a relatively larger exposure to the healthcare sector, one of the best performers in current times. Divis Lab, which is currently trading at its lifetime high, is among top holding of the fund.

The fund is well-diversified, holding 54 companies with the top five stocks occupying less than 30 per cent of the corpus. The trailing return of the fund has not been great; however, the 10-year performance of the fund has remained better than the category average. Therefore, looking at the current portfolio of the fund and its long-term performance, a conservative investor with an investment horizon of more than three years can invest in the fund.