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.

Reason for recommendation

The tone of the equity market has changed diametrically in the last week of this calendar year. In a matter of a few trading days, the equity indices broke some of the most important levels and now look to reverse the trend. Looking at the present market situation, it makes complete sense to take a conservative stance and nothing can be better than aggressive Hybrid Funds. Despite being equity-oriented, they also have a debt component that cushions your investment from large equity market drawdown. Canara Robeco Equity Hybrid Fund is one such fund from this category that provides decent returns in the long run.

Most importantly, it manages risk beautifully as compared to other funds in the category. Historically, this fund has provided inflation-beating returns and has mostly remained in the top two quartiles in terms of returns. The fund’s maximum drawdown is 16.12 per cent compared to the category average of 20.82 per cent. The downside capture ratio (lower the better) for the fund is just 93 whereas for the category it is 119. Looking at its portfolio, it has currently invested around 73 per cent in equity, 22 per cent in debt and 5 per cent in cash. 

Diving deeper, on the equity front it is more tilted towards Large-Caps with almost 78 per cent allocation to them and the remaining 22 per cent towards Mid-Caps. This fund has not invested in Small-Caps. On the sectoral front, it is overweight on financial, technology and automobile. On the debt front, majority of the allocations are towards government securities, followed by AAA-rated securities. Moreover, its average maturity works out to be 2.6 years with a reasonable YTM of 6.87 per cent. The fund is more suitable for a conservative investor having investment horizon of more than one year.