Fund of Fortnight
R@hul PotuCategories: DSIJ_Magazine_Web, DSIJMagazine_App, Fund of Fortnight, MF - DSIJ Recommendation, Mutual Fund
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.
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 equity markets across the globe are trading at an all-time high and the Indian equity market is no exception. Nonetheless, going ahead, we may see some volatility as the US Federal Reserve is expected to start its rate cut this month. Historically, this has led to volatility in the equity market. In such a case, it would be wise to invest in funds that are less volatile and at the same time do not lose on the opportunities that the market provides.
Hence, our recommendation this week is ICICI Prudential Nifty Alpha Low Volatility 30 ETF FOF. The fund is designed to provide investors with a potentially less risky way to participate in the equity market, particularly during periods of market volatility. The FOF aims to provide investors exposure to a balanced strategy that combines two factors: alpha (stocks with high returns compared to their benchmark) and low volatility (stocks that exhibit lower price fluctuations).
This blend seeks to optimise returns while minimising risks. The fund has more than 80 per cent exposure to Large-Cap stocks, which generally have lower volatility. The fund has no exposure to Small-Cap stocks. In terms of constituents, the fund holds major names in healthcare such as Sun Pharmaceuticals and Lupin Pharmaceuticals as well as consumer defensives like ITC and Colgate Palmolive. The fund has posted an 11.46 per cent return over the last three months, ahead of the category’s 10.35 per cent average. Although the fund slightly underperformed in the six-month period with a return of 16.90 per cent versus the category’s 18.19 per cent, its impressive one-year return of 57.16 per cent compared to the category average of 44.75 per cent indicates a robust long-term performance. The focus on low-volatility stocks can help mitigate the impact of market downturns, making it suitable for investors seeking a relatively stable investment option and suitable for investors with a moderate risk appetite.
