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
Small-Cap funds may remain attractive for long-term investors as India’s economic growth becomes more broadbased. These companies can benefit from rising domestic demand, formalisation, capex recovery and sector-specific opportunities. However, small-cap funds are volatile, so they suit investors who can stay invested patiently through market cycles. Hence, our selection of MF Select is Invesco India Smallcap Fund. The fund has delivered consistent outperformance across all time periods mentioned. In the last six months, it returned 4.44 per cent against the category average of 4.19 per cent, outperforming by 0.25 percentage points. Over one year, it generated 15.94 per cent, compared with 13.37 per cent for the category, a lead of 2.57 percentage points. The outperformance becomes stronger over longer periods.

Over two years, the fund delivered 16.00 per cent versus the category average of 10.93 per cent. Over three years, it returned 26.36 per cent, ahead of the category average of 20.72 per cent. It also stayed ahead over four, five and seven years, showing consistency across market phases. The portfolio has a strong sector spread. Services account for 22.29 per cent, followed by Healthcare at 21.96 per cent and Financials at 17.45 per cent. Consumer Discretionary and Automobiles hold 6.21 per cent and 6.03 per cent, respectively. This allocation gives the fund exposure to domestic growth, healthcare expansion, financial services and consumption-led opportunities. On risk, the fund stands out for its lower beta. Invesco India Smallcap Fund has a beta of 0.84, lower than ITI Small Cap Fund, Mahindra Manulife Small Cap Fund, Bandhan Small Cap Fund and Bank of India Small Cap Fund. This indicates relatively lower sensitivity to market movements. Its top holdings include Sai Life Sciences, Amber Enterprises, Max Healthcare, Krishna Institute of Medical Sciences and InterGlobe Aviation. Overall, the fund may be suitable for investors seeking long-term smallcap exposure with consistent outperformance and relatively controlled market sensitivity.

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