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.

Sundaram Large Cap Fund - Direct Plan




Reason for recommendation
The equity market post giving phenomenal returns for almost two and a half years ending October 2021 has started to see heightened volatility. There are various factors that have led to such a spike in volatility and one of them is higher inflation.In such circumstances, Large-Cap organisations spell better stability in returns. One such fund from this segment that does not appear in most of mutual fund recommendations is Sundaram Large-Cap Fund. This fund has surprised most investors with its resilient performance during tough times. In the last six months’ period it has managed to outperform its peers during every phase. Even in the longer timeframe it has outperformed its category average of large-cap funds.



For example, for quarters ending March 2020 and December 2021, it fell less than its category benchmark during both times. It also boosts one of the lowest expense ratios in its category. The fund has been able to generate better alpha compared to its category despite having a similar beta. This fund seems to be a little concentrated as despite holding 48 stocks, the top 10 holdings form almost 57.91 per cent of its overall assets. Moreover, even in terms of sectors, the top three contribute almost 58.8 per cent of the assets. Therefore, the fund carries concentration risk. However, in spite of that this fund is able to generate good alpha. This shows that the fund managers are good when itcomes to stock selection. As regards its portfolio, the fund’s top holdings are mostly index names such as ICICI Bank, Reliance Industries, HDFC Bank and Infosys, among others. In terms of sector allocation, it seems to be following a value approach and is overweight on financial, healthcare, automobile and construction sectors while being underweight on technology, energy and consumer staples. Therefore, we believe that this fund has the potential to generate better risk-adjusted returns going forward and may also provide protection during market downturns. However, this fund is mostly recommended for investors with risk profiles of moderate and above.