In the current volatile conditions, it is advisable for investors with a medium risk appetite to re-examine their portfolios. Investors’ interest in mid- and small- cap stocks and funds has been growing recently due to the positive momentum in these segments.
However, investing in small- and mid-caps does involve a fair degree of risk. Besides, there is a need for large cap funds in a portfolio to achieve diversification and long-term stability and thus, achieving financial goals.
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Against this backdrop, investors can consider Baroda BNP Paribas Large Cap Fund for long-term goals i.e. which are 7-10 years away. The fund has a robust track record of beating its benchmark and delivering above-average returns consistently over medium- and long-term.
Investors can take the SIP route to to overcome volatility and average costs.
Steady and consistent performer
Baroda BNP Paribas Large Cap fund is one of the few in its category to beat the benchmark Nifty 100 TRI across timeframes even on a point-to-point basis. Over one, three, five and 10-year periods, the fund has outperformed the benchmark by 1-5 percentage points. It has generally been among the top quartile to one-third of funds in the category.
On a rolling five-year basis over October 2013-October 2023, Baroda BNP Paribas Large Cap has delivered an average of 13.4 per cent return.
When the above 10-year window is taken and rolling five-year returns are considered, the fund has beaten the Nifty 100 TRI almost 75 per cent of the time, which is among the best in the category.
Again, over five-year rolling periods in the last 10 years, Baroda BNP Paribas Large Cap has delivered more than 12 per cent returns nearly 71 per cent of the times.
If SIP returns (XIRR) are considered over 10-year periods, the fund has given a robust 14.3 per cent in this timeframe.
These data points clearly indicate that the fund has been a fairly consistent performer in the category.
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The fund has an upside capture ratio of 97.5, indicating that its NAV may not rise more than the benchmark Nifty 100 TRI during rallies. Notably, its downside capture ratio is only 85.2, suggesting that the fund’s NAV falls a lot less than the benchmark during corrections. A score of 100 indicates that a fund performs in line with its benchmark. This is based on data for 2020-2023 period.
Smart portfolio moves
Given the fact that large-cap category funds have an investment universe of just the 100 top stocks, much of the outperformance is generated by juggling stock and sector weightages to a reasonable extent.
While banks and finance companies figure prominently in the fund’s portfolio, the weight is lower than in the index. While the Baroda BNP Paribas Large Cap had double-digit exposure to software sector in previous years, it trimmed stakes in recent months to near 10 per cent levels. FMCG, petroleum products and automobiles are other key constituents of this fund with holdings in single digits.
In each segment, the fund generally holds the top two or three players, similar to what many large-cap funds do.
Nevertheless, Baroda BNP Paribas Large Cap goes down the market cap curve. While more than 80 per cent of the portfolio flows into large-cap stocks, mid- and small-caps, too, figure prominently.
Over the last couple of years, mid- and small-cap stocks have accounted for around 6-12 per cent of the overall portfolio, providing a kicker to the fund’s returns.
The fund has maintained cash and debt position of 5-6 per cent across market cycles to insulate the portfolio from marker volatility.
Overall, the fund runs a compact portfolio with 46 stocks and adequate diversification. The focus seems to be more on investing in quality names, with a goal to achieve growth at reasonable price.
Investors can consider this fund as the core of their portfolio, with a 7-10 year horizon, and take the SIP route to take exposure.