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.
PGIM India Midcap Opportunities Fund - Direct Plan

Reason for recommendation
The equity market has once again gone into a correction mode after recovering smartly post the Russia-Ukraine war. The current downfall is mostly due to bad numbers posted by some of the index heavyweights. Nonetheless, what has become distinctly clear in the couple of weeks is that the broader market is outperforming the frontline market. In the last one month, Nifty Mid-Cap has been up by 5.01 per cent while Nifty 50 is down by 1 per cent. In such a situation it makes sense to invest in a fund from the broader indices. PGIM India Mid-Cap Opportunities Fund is one of the best funds in this category. It is one of the most consistent performing funds from the category and has remained in the top quartile in terms of performance in the last one-year, three-year and five-year periods. The turnaround in the fund’s performance has become visible after acquiring stake from DHFL a few years back. This fund is doing well in terms of returns. However, on the risk front it is a bit risky as its standard deviation and beta are at the higher end compared to the industry average. However, when combined with the returns it generates after taking such risk, it more than compensates the risk factor. It ranked top in terms of Sharpe and Sortino ratio, which calculates risk-adjusted returns. Analysing its portfolio, it had 50 stocks as of March 2022 and only 34.16 per cent of the assets forms the top 10 holdings and 23.3 per cent are in the top three sectors. This shows that the fund is well-diversified and is low on concentration risk. Moreover, it is a true-blue mid-cap fund with almost 75 per cent of its portfolio dedicated towards mid-cap stocks. Looking at its portfolio, stocks like Persistent Systems, Cummins India, ABB and Federal Bank are its top holdings with not more than 5 per cent allocated to an individual stock. On the sectoral front, it is overweight on capital goods, technology and healthcare while being underweight on financial, services and energy. Looking at the fund’s portfolio and performance, this is a high-risk, high-reward fund and is recommended for moderately aggressive to aggressive risktakers having an investment horizon of more than two years.