L&T midcap fund: Out of 16 consistent stocks, 7 outperformed the benchmark

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The L&T Midcap Fund was launched in August 2004 and featured in the small and midcap category of CRISIL Mutual Fund Rankings (CMFR) up to December 2017. Post the rationalisation of mutual funds by Sebi, the fund was repositioned as a mid-cap fund and has been ranked in the top 30 percentile of the midcap category in CMFR for the last three quarters ending September 2018. S N Lahiri (who is also CIO of the fund house) and Vihang Naik have been managing the fund since June 2013 and June 2016, respectively. During the last three years, the assets under management (AUM) of the fund has increased over eight times from Rs 401 crore in December 2015 to Rs 3,438 crore in November 2018.

The investment objective of the scheme is to generate capital appreciation by investing primarily in midcap stocks.

Consistent performance

The fund has consistently outperformed the benchmark (Nifty Midcap 100 TRI) and its peers (funds ranked under the mid cap category in September 2018 CRISIL Mutual Fund Ranking) in all the trailing periods under analysis. The fund has been an outperformer in bull runs. It significantly outperformed the benchmark and peers during the post-European crisis phase and the recent rally led by global liquidity and domestic reforms.

An investment of Rs 10,000 in the fund on August 9, 2004 (inception of the fund) would have grown to Rs 1,30,920 on December 24, 2018 at an annualised rate of 19.58 per cent, as compared to the category and the benchmark which would have grown to Rs 1,11,475 (18.25 per cent annually) and Rs 1,01,253 (17.46 per cent annually) respectively.

Portfolio analysis

During the past three years, the fund has maintained predominant allocation to mid- and small-cap stocks. Allocations to mid-cap and small-cap stocks averaged 38 per cent and 37 per cent of the portfolio respectively on average during this period. Large cap allocation averaged 13 per cent during the same period. During the past one year, the fund has gradually increased allocation to mid-cap stocks from 40 per cent in December 2017 to 65 per cent in November 2018 to align with the Sebi defined categorisation. 

It took exposure to 31 sectors during the past three years. The top five sectors of the fund’s equity portfolio were consumer non-durables with average allocation of 11.08 per cent, finance (8.88 per cent), industrial products (8.02 per cent), banks (7.98 per cent) and cement (6.93 per cent).

Graphite India, Triveni Engineering & Industries, Future Lifestyle Fashions, Aarti Industries and Avanti Feeds have been the highest contributors to the fund’s performance during the last three years.

The fund invested in 169 stocks during the last three years and held 16 stocks consistently. Among the consistently held stocks, Future Lifestyle Fashions, Aarti Industries, K.P.R Mills, The Ramco Cements and Indian Hume Pipe Company have been the major contributors to the fund’s performance during the period under analysis. Out of the 16 consistently held stocks, 7 outperformed the fund’s benchmark.

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