Fund of Fortnight

Reason for recommendation

The Indian equity market has witnessed a remarkable recovery from its recent lows and is up by almost 15 per cent. The expected soft landing of US’ economy and foreign institutional investors (FIIs) becoming net buyers are some of the factors that helped the market to recover. The recent outcome of the Reserve Bank of India’s bimonthly MPC meet was in line with that of expectations and it even maintained its GDP forecasts. Nevertheless, new geopolitical tension between the world’ two biggest economies, the US and China, is creating a fresh wave of uncertainty that will keep the market volatile for the time being. Therefore, in such a market scenario, rather than taking a more aggressive bet on the broader market, it would be wise to invest in Large-Cap and Mid-Cap funds that will help to capture the stability of large-caps and the aggressiveness of mid-cap stocks. Quant Large and Mid-Cap Fund is one such fund. Despite selling pressure from the FIIs, this fund has delivered 4.4 per cent on YTD basis while the S and P BSE Large and Mid-Cap TRI returned 1.64 per cent and the category average stood at negative 1.21 per cent in the same period. Even in terms of risk as measured by the standard deviation and beta, it is surprisingly less risky compared to its category and has generated the highest alpha among the categories.

Even in one-year, three-year and five-year periods, the fund has remained the best in the category in terms of returns. What has helped the fund to outperform is the quantitative approach adopted by the fund house based on its proprietary valuation, liquidity and risk appetite and time (VLRT) framework. This helps them in identifying the optimal level of cash or debt allocation in the scheme. Although this fund stands to generate great returns during the market rally, it gives deep pain when the market falls. Hence, clearly this fund is not meant for the risk-aversive. Aggressive investors can make a tactical allocation to this fund.