MF QueryBoard

Can you suggest a good mutual fund to invest in the speciality chemical sector? - Gowtham Thakur 

One thing that all of India’s top-performing stock funds have in common is that they have invested in businesses that produce the chemicals used in everything from lip balms to crop-booster fertilisers. These wagers have paid off as a result of an increase in the demand for speciality chemicals around the world in sectors like cosmetics and automotive as well as a recovery from the epidemic. In response to geopolitical worries, firms throughout the world have been forced to diversify their supply chains away from the China, which has benefitted producers as well. 

Chemicals producers in the nation are increasing capex expenditures in order to develop high-value products and increase their market share internationally. Small-Cap stocks are an asset class that has handily outperformed the benchmark index, and four of the top five funds in India this year are ones that specialise in them. The S&P BSE Small-Cap index has surged almost one per cent in a period of one year versus nearly 2 per cent fall for the S&P BSE Sensex index. Chemicals stocks make up at least 14 per cent of the portfolio for three mutual funds that have delivered the biggest returns.

Is it worth investing in the following funds? What about sectors? Or can you suggest better alternatives?
■ ICICI Prudential Blue Chip Growth Equity Large-Cap ■ Mirae Asset Emerging Blue Chip Growth Equity Large-Cap and Mid-Cap
■ Nippon India Multi-Cap Growth Equity Multi-Cap■ Parag Parikh Flexi-Cap Growth Equity.
- Tejas Bakori

Majority of your investments seem to be large-capbiased. Again, this depends on the investment amounts in the respective funds in question. However, let us first answer the question on sector funds. These can prove to be a double-edged sword as they work in cycles. Hence, investing in them either requires fairly long-term horizon or the ability to manage them tactically. To know more about which sector funds to bet on, you can check our upcoming issue wherein we would be dealing in more detail on this topic.

Let us now look at the investments in question one by one.

1. ICICI Prudential Blue Chip Fund — This is a pure large-cap fund that invests majority of its assets in Nifty 100 stocks. This is one of those few funds that actually beats its benchmark. It does makes sense to hold this fund.
2. Mirae Asset Emerging Blue Chip Fund — This is one of the best offerings from Mirae Asset Mutual Fund. This fund became a favourite in the post-pandemic rally. In fact, it was so popular that it restricted accepting more investments due to bloated assets under management. This fund is still better. However, if you are looking to add more investments to this fund, then you would be disappointed. So, if you wish to invest more, Canara Robeco Emerging Equities Fund is another good option.
3. Nippon India Multi-Cap Fund — Multi-cap funds are a unique proposition as they come with a minimum exposure of 25 per cent each in mid-cap and small-cap segment. That said, on a risk front they prove to be riskier than others in this list. This is very clear with the fund’s higher standard deviation and beta figures which are higher than the benchmark was well as category average.
4. Parag Parikh Flexi-Cap Fund — The very advantage of investing in this fund was it had a good blend on domestic and international equity securities. Its performance started deteriorating after the cap on investment in foreign securities was reached which compelled them to invest money predominantly into domestic markets. This resulted in lower overall allocation to international securities. However, its portfolio still holds good quality stocks. Also, its investing style is tilted more towards value. Looking at the current scenario where there is rerating of valuations going on, gradually accumulating the units of funds following value style stand to benefit in the long run.