Fund Call . Canara Robeco Bluechip: A good bet in uncertain times

The stock market has recouped most of its losses since March, and the Sensex is now again close to its alltime highs; this is despite the economic troubles in the country and India Inc’s weak earnings due to the coronavirus impact.

There is scepticism in many quarters that the market, sloshed with liquidity, is out of sync with ground realities and that a correction may be on the cards. Recently, the RBI Governor also hinted at this. That said, the market remains as unpredictable as ever, and it could be a mug’s game guessing its next move.

In this scenario, conservative investors who want to play it relatively safe but still have a leg in the market can consider buying well-run large-cap funds through the systematic investment plan (SIP) mode.

Quality large-cap stocks — given their size, market leadership and financial muscle — should do better than smaller stocks in market downsides and also participate well, if not as much as smaller stocks, during upsides. Since their March lows, smaller stock indices have gained more than large-cap ones, making them more susceptible to corrections.

The SIP mode of investing should help benefit from cost-averaging in market downsides though it could be sub-optimal if the rally continues unabated.

Among large-cap funds, Canara Robeco Bluechip is a fine choice. The fund has a good record of containing downsides, as seen during the market fall in the recent March quarter, too, when the fund lost less than its benchmark, S&P BSE 100 TRI, and the large-cap category average.

Stable performance

Despite lagging somewhat in the rally in the subsequent months, the fund is a top-performer on a year-to-date basis, posting positive returns compared with dips in the benchmark and category average.

Over longer periods, too, Canara Robeco Bluechip has beaten the benchmark convincingly and is in the top quartile in its category — with annualised returns of 17.5 per cent, 9 per cent, 10.4 per cent and 10.8 over the past year, three years, five years and 10 years, respectively. While the fund lagged a bit in calendar years 2016 and 2017, it made a good comeback in 2018 and 2019, and has followed this through in 2020.

In keeping with its large-cap mandate that calls for at least 80 per cent of the portfolio to be in large-cap stocks, the fund predominantly invests in such stocks (about 87 per cent as of June 2020). A small portion allocated to quality mid-caps (about 8 per cent as of June 2020) can provide a kicker to returns.

In general, the scheme has followed a steady allocation of 95-96 per cent of its corpus to equity with the rest in debt, cash and equivalents. Fund managers Shridatta Bhandwaldar and Sanjay Bembalkar follow a three-step investment process comprising competent management, robust business fundamentals and reasonable valuations.

The scheme’s investment style is a blend of growth and value strategies with a diversified, large-cap focus.

It has a fairly focussed portfolio (42 stocks as of July 2020), but the bluechip predominance reduces concentration risk.

The top 10 stocks in the portfolio account for about 51 per cent of the corpus; these include names such as Reliance Industries, Infosys and HDFC Bank that account for 8-9 per cent each and form the top holdings.

The smaller companies in the portfolio are also quality names such as Voltas, Indraprastha Gas and Kansai Nerolac Paints.

Timely sector and stock shifts have helped, too. Since February 2020, the fund has reduced its exposure to the under-pressure banking sector (it remains the largest holding though) and finance companies, while adding stakes in software and auto stocks.

Prominent stake hikes include those in Reliance Industries (the strong rally in which has helped the fund) and Infosys, while stakes have been cut in SBI, Avenue Supermarts and HDFC Bank.