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
As the general elections are now over and one of the biggest uncertainties from the market perspective is now behind us, we need to focus on the segment that is going to outperform. We believe that Large-Cap stocks may take the lead now. However, the broader market cannot be ignored. Hence, our choice of MF Select this time is Parag Parikh Flexi Cap Fund that invests across the entire spectrum of market capitalisation. The fund has shown strong performance in longer timeframes when compared to its category average. Over three years, the fund achieved a return of 21.7 per cent, surpassing the category average of 18.87 per cent. Similarly, over five years, the fund returned 25.2 per cent, much higher than the category average of 19.02 per cent. Over a ten-year period, the fund returned 18.79 per cent as compared to the category average of 15.8 per cent. The fund’s portfolio is strategically diversified across several key sectors. The largest allocation is in financials at 31.5 per cent, followed by services at 13.44 per cent and technology at 9.51 per cent. This diversification helps to spread risk while capturing growth opportunities across various segments of the economy. The fund’s top individual holdings at the end of April 2024 included HDFC Bank at 8.06 per cent, followed by Power Grid Corporation of India at 6.42 per cent, and Bajaj Holdings & Investment at 6.2 per cent. Other notable holdings include Maruti Suzuki India Ltd. (5.54 per cent), ICICI Bank Ltd. (5.26 per cent) and ITC Ltd. (5.01 per cent). These companies are leaders in their respective industries, adding both stability and growth potential to the fund’s portfolio.

When comparing different funds from this category, this fund stands out with a higher alpha of 5.77 compared to the category average of 4.41, indicating a higher outperformance against the benchmark. Additionally, the fund has a lower beta of 0.71 versus 0.77, suggesting it is less sensitive to market ups and downs, providing more stable returns. Its impressive returns, especially over extended periods, make it an attractive option for those looking to invest in a well-managed, stable mutual fund.