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
When it comes to the equity market, always expect the unexpected. While everyone was looking forward to a growthoriented budget and moderation in US’ Federal Reserve rate hike, which actually happened, no one expected the Adani Group incident that jolted the market. It has made the market quite volatile at the moment and therefore it makes complete sense to take a conservative approach with your equity investments. At such a time, we believe that having exposure to Large-Caps is logical. Our suggestion therefore is to invest in HDFC Index Fund Nifty 50 Plan, which is an index fund. We have recommended an index fund over actively managed large-cap funds as there are very few actively managed largecap funds that have consistently outperformed the index. With an expense ratio of a mere 0.2 per cent, this fund has one of the lowest tracking errors. Moreover, the expense ratio of index funds is quite low as compared to actively managed large-cap funds. In terms of returns, this fund has consistently outperformed actively managed large-cap funds in all the trailing periods. However, the risk is slightly higher compared to large-cap funds. This is evident with the standard deviation and beta which is higher than large-cap funds.






However, in terms of risk-adjusted returns, this fund scores over large-cap funds. Despite being an index of 50 stocks, this fund is highly concentrated with 58 per cent of its assets dedicated to top 10 holdings while 64 per cent of the assets cover the top three sectors. On the sectoral front, this fund is overweight on financials, energy and technology whereas it is underweight on consumer staples, automobile and materials. The fund is well suited for conservative investors with an investment horizon of one year.