Fund of Fortnight

Tata Flexi Cap Fund - Direct Plan

Reason for recommendation

The youngest mutual fund category in India – the flexi-cap category – has been receiving fair bit of attention. It requires mutual funds to invest at least 65 per cent of the corpus in equity without any restrictions on investing in Large-Cap,

Tata Flexi-Cap Fund, one of the funds from this category that is biased towards large-cap stocks constituting almost 75 per cent, makes sense. In a falling market, large-cap tends to fall less than other categories. That the fund has fallen less even in its category during the downturn is very much evident from its beta which stands at 0.82 as against the category average of 0.92. Moreover, its standard deviation is also one of the lowest in the category and is able to generate one of the best alphas. Even its risk-adjusted return as measured by the Sharpe and Sortino ratios outshines the category average.

The portfolio of this fund is well-diversified and consists of 48 stocks of which the top 10 stocks form 47.28 per cent of the assets while the top three sectors form 50.36 per cent of its assets. Diving deep into its portfolio, it shows that the fund has taken a contrarian bet and is underweight on financials, automobiles, metals and healthcare while being overweight on technology, materials, and energy and consumer staples. Though the fund’s investment style is growth, its top holdings are value stocks, which are likely to do better going ahead. Hence, this fund is suitable for investors with moderate risk appetite and an investment horizon of at least one year.