Fund of Fortnight

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. [EasyDNNnews:PaidContentStart]

Reason for recommendation
After a phase of underperformance, Small-Cap funds are beginning to turn the corner. With improving macroeconomic indicators, strong domestic consumption, and a growing appetite for risk among investors, the small-cap segment is poised to benefit significantly. Historically, these funds tend to outperform in the early stages of economic recovery, and the current landscape seems to reflect that. If you're looking for long-term wealth creation and can stomach short-term volatility, small-cap funds may be a timely bet—and the Bandhan Small Cap Fund is a standout in this category. The fund has consistently outshined the category average across multiple timeframes. Over 6 months, it delivered 1.69 per cent while the category stayed in negative territory at -0.37 per cent. Over the longer term, its performance becomes even more compelling: 40.94 per cent vs. 25.22 per cent over 2 years, 35.92 per cent vs. 26.74 per cent over 3 years, and 38.09 per cent vs. 34.9 per cent over 5 years. Clearly, the fund has demonstrated superior alpha generation.

The fund adopts a well-diversified sectoral allocation. Financials lead the portfolio with a weightage of 19.09 per cent, followed by Healthcare at 11.61 per cent, Services at 9.5 per cent, and Construction at 9.06 per cent. This strategic spread across cyclical and non-cyclical sectors enhances its resilience.

With a Sharpe ratio of 1.53 and a Sortino ratio of 2.31, the fund has the best risk-adjusted returns in the category. The fund’s top holdings reflect strong bottom-up stock picking. Its largest exposure is to Sobha Ltd. (3.14 per cent), a prominent real estate developer. Other key names include LT Foods (2.52 per cent), South Indian Bank (2.38 per cent), Cholamandalam Financial Holdings (2.04 per cent), and PCBL Chemical (1.81 per cent)—a diversified basket across sectors and market themes. With superior long-term returns, a balanced sectoral approach, and excellent risk-adjusted metrics, it stands out as a smart pick for growth-oriented investors with a medium- to long-term horizon.

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