Why this Large and Midcap Fund got a Gold Rating

Large and Midcap funds invest 35% of net assets each in Large and Midcap stocks. This category has assets under management worth Rs 96,660 crore as of August 2021. There are 28 funds in this category. Our analysts recently reviewed two funds from this category. Here is a brief overview and analysis of these funds.

Mirae Asset Emerging Bluechip Fund

  • Star Rating: 5 Stars
  • Analyst Rating: Gold (Regular Plan), Gold (Direct Plan)
  • Morningstar Analyst: Nehal Meshram
  • Fund Manager: Neelesh Surana and Ankit Jain
  • Inception: July 2010
  • Return: 67.81% (1 year), 24.15% (3 year), 21.51% (5 year), 24.62% (10 year), 22.57% (since inception). Return of regular plan as on September 13, 2021
  • Date of Analysis: August 2021
  • Number of stocks: 68
  • Assets in top 10 holdings: 38%
  • Assets under management: Rs 20,515 crore (August 2021)
  • Investment Style: Large Blend
  • Total Expense Ratio: 1.83% (regular), 0.70% (direct)
  • Fund Overview 

People

The fund is managed by Neelesh Surana and Ankit Jain. Surana is an experienced lead manager and the CIO of equity. All the funds he has managed have consistently outperformed their respective benchmarks by a wide margin. Co-manager Ankit Jain has an overall experience of 10 years. He joined Mirae in September 2015 as a research analyst and started managing funds in April 2017.

Process

The investment philosophy centres around high-quality businesses with good credentials. The team combines fundamental analysis with quantitative screens, seeking firms with high earnings growth potential, strong balance sheets, and high cash flow. The team also looks for price value gap in stock selection and considers such metrics as P/E, P/B, and EV/EBITDA. The team further filters and invests in companies that generate EBITDA/cash flows of around 100 crores. It avoids smaller companies as the idea is not to buy in at an early stage but to invest in evolving mid-caps that have the potential to become large-caps.

Performance

Mirae Asset Emerging Bluechip has an enviable long-term track record. It was launched in a bear market environment in 2010 but still has outperformed its category and benchmark across different time frames and is ranked as a first-quartile performer. The fund’s direct share class outperformed 81% of its peers as of July 2021 on a Morningstar Risk-Adjusted Return basis since inception because of its focus on quality stocks. Even on a calendar-year basis, performance has been superlative.

The fund also stacks up well in protecting the capital better than most of its peers during market slumps. On a year-to-date basis (January to July 2021), the fund (direct share class) gained 29.70% as opposed to the negative 26.26% return of its category average. 

DSP Equity Opportunities Fund

  • Star Rating: 3 Stars
  • Analyst Rating: Neutral (Regular Plan), Bronze (Direct Plan)
  • Morningstar Analyst: Himanshu Srivastava
  • Fund Manager: Rohit Singhania, Jay Kothari and Charanjit Singh
  • Inception: May 2000
  • Return: 64.98% (1 year), 18.75% (3 year), 15.93% (5 year), 16.64% (10 year), 18.36% (since inception). Return of regular plan as on September 13, 2021
  • Date of Analysis: August 2021
  • Number of stocks: 60
  • Assets in top 10 holdings: 41 %
  • Assets under management: Rs 6,956 crore (August 2021)
  • Investment Style: Large Blend
  • Total Expense Ratio: 1.87 % (regular), 0.97% (direct)
  • Fund Overview 

People

Rohit Singhania joined DSP Investment Managers in 2005 as a research analyst in its PMS division and moved to the equity investment team in June 2009. He became comanager of DSP TIGER Fund in June 2010 and its lead manager in June 2012. He has been managing this fund since June 2015. He comes across as an informed individual, thanks to his extensive research experience. As a portfolio manager, his investment thesis is sound, extensively researched, and well executed.

Process

Analysts construct sector-based model portfolios comprising the best ideas from stocks in their investment universe. Stocks are evaluated using quantitative ratios such as return on capital employed, return on equity, price/earnings, price/book value, and EV/EBITDA, among others, with the analysis and research inputs of key sell-side analysts incorporated into the model.

The manager uses sector-based model portfolios created by analysts as his initial reference point, and he plies an overlay by using the change in ROCE/ROE compared with a company's intrinsic growth and P/BV as an appropriate measure to evaluate stocks.

Performance

Under Rohit Singhania (June 2015 to July 2021), the fund’s direct share class clocked a growth of 16.1%, thus outperforming the benchmark index (14.5%) and the category average (13.5%). Consequently, it is a first-quartile performer in the category on both returns and a Morningstar Risk-Adjusted Returns front. In 2015 and 2016, when markets struggled to be in the positive territory, Singhania managed to scout attractive stock-specific opportunities and capitalise on them. His investments in Maruti Suzuki, Hindustan Petroleum, and SBI reaped rich benefits for the fund. In 2017, when the markets saw a major mid- and small-cap rally, the fund’s lower exposure in them dragged its performance down with regard to some of its more-flexible peers.

Source: Morningstar India Website