Fund of Fortnight

This is our mutual fund recommendation. Every fortnight , we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same.

DSP Midcap Fund - Direct Plan (Growth)

Reason for recommendation
The year 2021 will be a year for the broader market. This category has witnessed long consolidation of almost 30 months till the mid of 2020 after witnessing a sharp run-up in the year 2017. In the last few years, the company from this category has improved its fundamental significantly. Looking at the ‘V’-shaped recovery in the economic activity, broader indices are likely to outperform frontline equity indices. In such a scenario, a fund from the mid-cap category will make better sense with an investment horizon of 3-5 years. DSP Mid-Cap Fund, one of the largest funds in its category by asset under management, is one such fund, which you can add to your portfolio.

It is a pure mid-cap-dedicated fund and has invested 77.76 per cent of its corpus in mid-cap stocks, 16 per cent in large-caps and around 7 per cent in small-caps. What gives comfort about the fund is that it is one of the best risk statistics in its category. The fund’s standard deviation and beta remain at the top quartile in the category. Lower beta has impacted the recent performance of the fund; however, if you look at the long-term performance of the fund, it has been able to beat both its benchmark and peers.

Going forward, the fund is likely to do well with its well-diversi-fied portfolio. As of January 31, 2021, the fund is overweighting on cyclical and hold 62 per cent of it corpus. As the economy gathers pace, cyclical stocks are expected to outperform others such as defensive stocks. In terms of sectors, the fund is over-weight on financial, chemicals and technology. The fund is well-diversified with 43 stocks and the top 10 stocks hold around 37 per cent of the corpus.