Markets have turned volatile in recent weeks as a mix of factors, including expensive valuations, FIIs paring exposures, geopolitical tensions and rising allocation to China as that country initiates a stimulus programme, are at play.

As a market segment that is still reasonably valued and could be a helpful addition when broader markets correct, large caps present an attractive investment opportunity.

In general, across market cycles, large caps must form a critical part of the portfolio holdings in the case of investors with a medium risk appetite.

In this regard, investors can consider the Canara Robeco Blue Chip Equity Fund (Canara Robeco Blue Chip) for long-term goals that are 7-10 years away.

Consistent benchmark and category beating performance and above-average returns over the long term make the scheme attractive for investors with a reasonable risk appetite.

Taking the SIP route for taking exposure to the fund would help average costs and reduce portfolio volatility.

Healthy outperformance

The fund has been a quality performer in the large cap category over the years, since inception in 2010. In a category where surpassing the benchmark is challenging, Canara Robeco Blue Chip has consistently been able to deliver outperformance.

Over the past 1-year, 3-year, 5-year and 10-year timeframes, the fund has delivered 35.5 per cent, 15.2 per cent, 21.8 per cent and 16.1 per cent, respectively on a point-to-point basis. The scheme outperformed its benchmark, BSE 100 TRI, by 1-3 percentage points across time periods.

When five-year rolling returns over the past 10-year period October 2014 to October 2024 are considered, the fund has delivered mean returns of 15.6 per cent. For comparison, the BSE 100 TRI delivered average returns of 13.2 per cent.

Also, in the period mentioned above, on a 5-year rolling basis, the scheme has beaten its benchmark BSE 100 TRI all the time. It has delivered more than 12 per cent over 78 per cent of the time during this period and more than 15 per cent nearly 60 per cent of the time.

The fund’s SIP returns (XIRR) over the past 10 years are healthy, at 18.1 per cent. An SIP in its benchmark BSE 100 TRI would have returned 16.6 per cent over the same period.

All return figures pertain to the direct plan of the fund.

Canara Robeco Blue Chip Equity fund has an upside capture ratio of 95.3, indicating that its NAV rises less than the benchmark during rallies. But more importantly, it has a downside capture ratio of just 89.1, suggesting that the scheme’s NAV falls much less than the BSE 100 TRI during corrections. A score of 100 indicates that a fund performs in line with its benchmark. These observations are based on data from October 2021-October 2024.

Steady portfolio

In keeping with its mandate of having a large-cap portfolio, the fund holds 85-90 per cent of its holdings in such stocks. However, Canara Robeco Blue Chip also holds 6-9 per cent of its portfolio in mid caps, to derive a kicker to the overall returns.

The exposure in stocks is reserved for the top few companies in any given sector, with rare deviations.

In terms of sectors held, banks and software companies always figure on top of the fund’s holdings across timeframes. Over the past three years, the large caps in these two segments haven’t rallied much despite a roaring bull market and given the fund a value focus.

In recent portfolios it has added exposures to pharmaceuticals and healthcare firms, and automobile companies. Exposures have been pared in sectors such as FMCG and finance firms (NBFCs). These sectors are rotated over time depending on market conditions and individual segment dynamics.

The fund generally holds 50-plus stocks in its portfolio. Exposure to individual stocks is less than 5 per cent barring the top few holdings, and is diffused.

In terms of cash and debt calls, the fund usually avoids taking heavy positions. The fund remains invested across most market cycles and cash/debt are restricted to 4-5 per cent of the portfolio.

Overall, Canara Robeco Blue Chip Equity is well-suited for investors with medium to above-average risk appetite.

Those looking for the long-term of at least seven-plus years can consider the scheme via the systematic investment route.

The scheme can be a part of the core portfolio or be considered for being a key component as a diversifier in the satellite portion.

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