L&T India Value Fund

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L&T India Value Fund Scheme seeks to generate long term capital appreciation from a diversified portfolio of predominantly equity and equity related securities, in the Indian markets with higher focus on undervalued securities. It could also additionally invest in Foreign Securities in international markets.

L&T India Value Fund is not a specially designated mid-cap fund but has figured in this category because of its relatively high exposure to this market-cap range. It started off in a difficult year but has managed a very consistent show since then, outperforming the indices and peers every year except its debut one.

While most mid and small-cap funds in the market tend to stick to a growth style of investing, this fund is managed in a value style. It hunts for undervalued stocks in the market and is market-cap agnostic. Value opportunities are often identified in sectors and companies in special situations such as cyclically low earnings, turnaround and revival plays and so on.

Recently, a high 45 to 55 per cent of the portfolio has been parked in large caps, 35 to 40 per cent in mid-caps and the rest in small-caps. This makes the fund overweight on large-caps relative to its peers.

L&T India Value Fund returns since launch are at 18.2 per cent. On the basis of three and five year CAGR, it has outperformed its benchmark by 10 to 12 percentage points and peers by 2 to 3 percentage points. It has been ahead of its benchmark and peers in every year since launch but is yet to encounter a serious bear market like 2008.

L&T India Value Fund has outpaced its index and peers in the last one year, despite this being a challenging period for mid-cap funds. This could be owing to its tilt towards value investing, a style that has made a comeback since 2016.

L&T India Value Fund – A value fund to beat high market valuations.

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Axis Long Term Equity Fund

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The deadline to show investment details for FY18, i.e. March 31, is approaching and several investors may be considering tax-saving schemes of mutual funds. For them, an equity-linked savings scheme (ELSS) may be a good option.

Among ELSS schemes, which come with a three-year lock-in, Axis Long-term Equity Fund has been a decent performer. Jinesh Gopani, who has been managing the scheme for more than six years, focuses on good-quality companies. The fund manager takes into account key return ratios, such as return on capital employed and other parameters, which give a fair idea about the scalability of the businesses. About 60-70% of the scheme’s portfolio consists of large-sized companies, while 20-30% is from the mid-cap basket, and the rest from the small-cap universe. In the past six months, Gopani has invested in companies that are expected to report stable earnings growth in the coming quarters.

These companies are spread across sectors. A few prominent companies that are part of the scheme’s portfolio include M&M, Divis Laboratories, Infosys and Gujarat Pipavav Port.

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Dynamic Equity Funds Tax Advantages

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What is the tax treatment of dynamic equity funds?

A big advantage of these funds is that they are structured in such a way that they are taxed as equity funds for investors. Most funds, when they lower their exposure to equities, ensure that equity plus arbitrage component of the scheme is at least 65% of the corpus, which helps it qualify for equity taxation. When the fund qualifies for equity taxation, investors who hold the fund for one year need to pay zero long-term capital gains tax, making the investments tax free.

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Franklin India Smaller Companies Fund

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This Fund is now called Franklin India Smallcap Fund

Franklin India Smaller Companies Fund scheme aims to provide long-term capital appreciation by investing in mid and small cap companies. Normally, it would invest atleast 75 per cent of its assets in smaller companies.

Franklin India Smaller Companies Fund which has held onto four and five star ratings since 2013, it has outperformed its benchmark without a break for the last nine years. In terms of investing style, it manages a balance between businesses with an acceptable level of quality, growth and sustainability.

It invests in stocks with a market-cap below that of the 100th stock in the Nifty 500 Index. The fund usually holds 30 to 40 per cent of its portfolio in small-caps, 45 to 50 per cent in mid-caps and 10 to15 per cent in large-caps. The fund’s approach is wholly bottom up. It looks for companies which can compound their earnings at a high rate, with good returns on capital, low capital intensity and capable management. To handle size, it has a leeway to invest 25 per cent of its corpus in large-caps.

Looking back at its return history, it has been a strong outperformer in undervalued markets, with a moderation during big bull phases. After a sub-par debut year in 2007, the fund navigated the big bull markets of 2012 and 2014 well, while containing losses below those of the benchmark in 2011. On a three and five year basis, it has outperformed its benchmark by 2 to 10 percentage points but has been neck and neck with the category.

In the last one year, a challenging period for active funds, it beat its benchmark but lagged behind the category. While this has been one of the few funds not to shut its gates to new inflows (its flexible mandate allows leeway to handle flows), its size has burgeoned to over Rs 7,280 crore by January 2018.

Franklin India Smaller Companies Fund is A quality-conscious small-cap fund.

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Multicap Funds

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Multi-cap mutual funds can invest in small-, mid-, and large-cap stocks. The proportion in which these are held can be unique to each fund. This makes it difficult to compare one such fund to another

One of the basic equity funds that many advisers and distributors tell people to buy is a multi-cap fund. It is, in the truest sense of the word, a diversified equity fund because it aims to invest across stocks and sectors, and also in companies of different sizes: large, medium and small. But that also makes a comparison between two multi-cap funds a bit tricky. You should know that one multi-cap fund can be vastly different from another.

Divergence

How much a multi-cap fund invests in large-, mid- and small-cap companies depends on its fund manager. If the equity market has fallen a lot and is at a bottom, according to the fund manager, then she may consider increasing the scheme’s exposure to small- and mid-cap stocks. Typically, when equity markets rise, the small- and mid-caps rise first and faster. But if equity markets have risen enough already and valuations seem expensive—like many experts describe the current market situation as—then typically multi-cap fund managers tilt their portfolios towards large-cap stocks. Some fund managers may even avoid small-cap stocks altogether or keep their exposures low.

Out of 59 multi-cap funds, 45 schemes had less than 10% of their respective overall portfolios in small-cap scrips. But a fund that invests, say, 7-10% in small-cap scrips can also behave very differently from one that doesn’t have any small-cap scrip. Presence of small-cap scrips in a fund’s portfolio makes the portfolio more volatile. Of course, the potential of returns increase but so does the risk.

Distributors say that if a fund manager can manage the risk, there’s nothing wrong with a multi-cap fund holding such scrips. Some advisers, however, said they avoid those multi-cap funds that have a tilt towards small- and mid-sized companies. All multi-cap funds have a certain portion of their portfolios in shares of mid-cap companies (and some of them in shares of small-sized ones as well), but whether the portfolio tilts more towards them or away, is the question. Of the 59 multi-cap funds, 39 schemes have at least 30% exposure in such stocks. Four schemes have a majority of their respective portfolios in small- and mid-cap companies, with BOI Axa Equity Fund (BAEF) having 58% of its portfolio in mid- and small-cap scrips.

Changing teams

Although multi-cap schemes are supposed to diversify between large-cap and mid-cap (including small-cap) companies, sometimes the fund manager invests significantly in large companies. As a result, a multi-cap fund can also start getting classified as a large-cap fund. In March 2013, Reliance Vision Fund, an erstwhile large-cap fund got re-classified as a multi-cap fund. Six months later, it got re-classified as a mid-cap fund. In March 2014, it got re-classified as a multi-cap fund again. In September 2016, it became a large-cap fund. The fund house did not deliberately change the classification, as it has been managed as a diversified equity fund for many years now. This problem will go away next year as all fund houses will now have to strictly follow the new norms of fund classification as per the capital market regulator.

What should you do

Apart from the fund manager’s track record, check your risk profile before you pick a multi-cap fund. Between two funds, just because one multi-cap fund gives higher returns, doesn’t necessarily mean it is the better of the two. The higher returns may have also come because of an aggressive management, which may not hold in good stead always.

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HDFC Equity – MultiCap Equity Fund

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Prashant Jain is an extremely skilled and experienced manager and has one of the longest track records in the Indian mutual fund industry. An unwavering focus on the long term and willingness to back conviction bets are integral to manager Prashant Jain’s investment approach. Hence, he doesn’t shy away from trading near-term pain for long-term gains. Research is central to the investment style, with Jain effortlessly combining top-down and bottom-up analysis (with more emphasis on the latter) to identify companies with robust business models, strong balance sheets, and competitive advantages. While the fund may underperform over the short term, given Prashant’s propensity to be early in the cycle, the long-term performance over a market cycle is stellar.

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Aditya Birla Sun Life Frontline Equity – Large Cap Equity

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Aditya Birla Sun Life Frontline Equity Fund invests predominantly into large cap stocks, with a midcap exposure between 15% and 20%. Mahesh Patil is an experienced and skilled manager and his well-executed investment approach makes this fund a compelling choice for investors. Patil loosely aligns the portfolio’s sector weightings with those of the index. His stock-picking has been impressive. A growth bias is apparent as Patil focuses on factors such as ROCE, ROE, and earnings growth potential. The fund has been a consistent performer across the years.

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Franklin India Short Term Income Fund

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Franklin India Short Term Income Fund

All through Franklin Templeton Asset Management (India) Pvt. Ltd’s turbulent period in 2015, when the first signs of a credit default—and its disastrous impact on mutual funds — came and then later when the fund house’s own debt schemes sold their own holdings in Jindal Steel and Power Ltd (JSPL) debt securities at a loss; we had held on to Franklin India Short Term Income Fund (FSTIF) in Mint50. FSTIF was its only debt scheme in Mint50. Reason: despite a high-risk portfolio of low-rated securities that could spook out the ordinary investor, we had faith in fund manager Santosh Kamath who had otherwise managed the portfolio deftly, leaving aside the JSPL fiasco. Its 1-year return for most weeks ending in 2017 was around 10-11%; one of the best in the category. Of course the fund took very high risks to achieve that, something not all funds would—and rightly so— be doing. So what went wrong? According to Franklin Templeton AMC’s annual report for the year ending September 2016 (October to September calendar), it turned out that the AMC had bought over JSPL’s papers from the debt schemes of Templeton in 2016 At the time, the AMC had not disclosed this.

The AMC bought the paper from the scheme, at what seemed like a discount. Plus, it played the dual role of the price setter as well as the buyer (instead of say, appointing an external valuer). This left a bitter taste in our mouth.

The fund house may have ticked the regulatory boxes, but this raises corporate governance issues, especially when, according to news reports, two other fund houses recently took some companies to the National Company Law Tribunal for defaulting on their payments.

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DSP BlackRock Equity Fund

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DSP BlackRock Equity Fund Scheme Information
Fund manager Atul Bhole
AUM in crores 2504
Exit load < 12 months: 1%,
> =12 months: Nil
Equity 98.01%
Performance as on 21st feb 1 Month 3 Months 6 Months 1 Year 2 Years 3 Years 5 Years 8 Years 10 Years 15 Years 20 Years Since Inception*
DSP BlackRock Equity Fund – Reg – Dividend (6.17%) (0.25%) 5.94% 18.32% 25.04% 8.96% 16.92% 13.13% 11.85% 24.75% 20.90% 20.41%

*inception date-29th April 1997

Equity Composition
Large Cap Mid Cap Small Cap Micro Cap
60% 12% 10.7% 15.3%
Top 5 sectors Holdings
Banks 20.43%
Finance 9.69%
Construction Project 6.72%
Consumer Non Durables 6.38%
Cement 6.07%

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HDFC Mid-Cap Opportunities Fund

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Fund Manager: Chirag Setalvad
Investment Style: Mid Growth
Investment Process: The fund manager invests in tangible businesses and continues to hold them over the long term.

He seeks quality companies from the mid-cap segment that he believes are reasonably priced.

Rating: Gold

Date of Analysis: May 2017

HDFC Mid-Cap Opportunities Fund is one of the best at what it does. Chirag Setalvad stands out as a capable manager who applies a hands-on approach towards research. The small/mid-cap segment can best describe the volatility across Indian equity markets. Other factors such as constrained liquidity and limited coverage can make small/mid-cap investing slightly more challenging. Hence, the need for a skilled manager and a solid investment process cannot be overstated.

HDFC Mid-Cap Opportunities makes the grade on all counts. In our opinion, Setalvad ranks amongst the best portfolio managers in the India. He has been managing this fund since its inception in June 2007, and we view his long tenure at the fund house as a positive. Detailed and exhaustive research is central to his investment approach. Setalvad emphasises gaining an in-depth understanding of a business before investing. He seeks companies with proven track records so he can gauge how they have held up during testing times. There is a perceptible quality bias in the investment style, characterised by investments in companies with strong management teams and robust business models.

HDFC Mid-Cap Opportunities inherent investment style is one that we have come to associate with the fund company’s equity funds. Setalvad combines absolute and relative valuation parameters to select stocks that aren’t too expensive relative to their growth prospects. The manager is a patient investor with a long-term investment horizon, which jells well with the quality bias. Given the bias for quality stocks, we expect the fund to underperform the competition in market phases when speculative fare is in favour.

Investors must also note that Setalvad’s tendency to make contrarian investments can result in a divergent showing versus the category over shorter time periods. Nonetheless, over a market cycle, we believe the fund is equipped to serve investors well. Our confidence in the fund’s performance potential has only grown stronger over time

SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

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