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 

Small-Cap funds have been the darling of investors in the last one year. They have outperformed most of the categories. Nonetheless, it’s time to be cautious for investors with a short-term investment horizon. Investors with a long-term investment horizon can still invest in these funds. Our choice of mutual fund for this issue is from this category, Mahindra Manulife Small-Cap Fund. This is one of the youngest funds and also with one of the lowest expense ratio in this category. Furthermore, the fund has demonstrated impressive returns across various periods when compared to its category average. 

In the past three and six months, the fund returned 9.48 per cent and 26.54 per cent, respectively, outperforming the category averages of 6.22 per cent and 18.03 per cent. Over a one-year period, the fund has significantly outperformed with a return of 70.5 per cent, compared to the category average of 49.05 per cent. The fund’s portfolio is well-diversified across several key sectors. The highest allocation is to consumer staples at 13.55 per cent, followed by financials at 11.47 per cent, and metals and mining at 10.3 per cent. The fund also holds positions in materials, construction, healthcare and automobile sectors, providing a balanced exposure to various segments of the economy. 

This diversified sectoral allocation helps in reducing sectorspecific risks while capturing growth opportunities across the market. The fund’s top individual holdings include strong and well-known companies. The largest holding is Century Textiles and Industries Ltd. at 3.22 per cent, followed by Godrej Industries at 2.64 per cent and REC at 2.61 per cent. Other notable holdings are Reliance Industries (2.59 per cent), Grasim Industries (2.42 per cent) and Indus Towers. These companies are leaders in their respective industries, adding stability and growth potential to the fund. This fund is highly recommended for high-risk investors with at least five years of investment horizon.