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
With some recent corporate developments having removed the overhang on the Indian equity market, there have been some signs of recovery. Nevertheless, we are yet not out of the woods and there are higher chances of Large-Caps and Mid-Caps doing well in the near term. Keeping this in mind it makes sense to invest in a large and mid-cap fund. SBI Large and Mid-Cap Fund is a perfect candidate. In terms of returns, it has outperformed its peers and benchmark in almost all the trailing periods. For example, in the last one year it has given return of 11.31 per cent compared to 6.44 per cent generated by the category average. 

Even if we take the rolling returns of one year, three years and five years, it has generated better returns than the category median average. In terms of risk, although this fund takes higher risk compared to its category, it has delivered enough returns for the risk undertaken. This is quite evident from its higher standard deviation representing volatility or risk and higher Sharpe ratio, which shows risk-adjusted return. Looking at its portfolio, the fund is well-diversified and held 63 stocks at the end of January 2023.

It currently holds 45.94 per cent in large-cap stocks, 38.8 per cent in mid-cap stocks and the rest in Small-Cap stocks. This also shows that the fund is diversified across various market capitalisations. The fund is overweight on sectors such as financial, automobile and consumer staples, but is underweight on technology, energy and materials. ICICI Bank, HDFC Bank, Infosys, State Bank of India and Axis Bank form a part of its top holdings. Given all such characteristics of the fund, it is suitable for moderate to moderately aggressive investors.