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 last two trading days of the recently concluded fiscal year displayed some sign of green shoots in an otherwise falling equity market. The market is likely to take a breather in the upcoming months. However, global concerns still persist. Therefore, taking a calculated risk at the current juncture would seem a prudent idea. In such a scenario, our recommendation is to invest in a flexi-cap fund that has a perfect blend of Large-Cap, Mid-Cap and Small-Cap stocks. Union Flexi-Cap Fund is a prominent option to consider at this stage. It holds 68 per cent of its funds in large-cap stocks. The balance is divided between 18 per cent in mid-cap stocks and 14 per cent in small-cap stocks. In terms of returns, this fund has been successful in beating its benchmark as well as its category in the long term. Moreover, in terms of its three-year rolling returns, Union Flexi-Cap Fund beats the Nifty 500 TRI. Moreover, only for 3 per cent of the time during its three-year rolling returns did this fund give negative returns while the maximum drawdown was not more than 5 per cent. Although the fund’s up-capture ratio is below 100 (98), it is still better than its category average.



In fact, the fund’s down-capture ratio is lower than the category average, which makes it a better choice. A study of its portfolio reveals that a prime portion of its exposure is to cyclical sectors such as financial services and consumer cyclicals. However, the fund is underweight on defensive sectors like consumer defensive, healthcare and utilities. Union Flexi-Cap Fund is well-poised to capture the upside in the market. Its top holdings include stocks like HDFC Bank, ICICI Bank, Reliance and Infosys. This fund is more suitable for moderately aggressive to aggressive investors.