- A large-cap oriented equity fund
- Some exposure to mid-cap stocks to lift returns
- Steady, market-beating performance at all times
- Holds a portfolio of quality stocks
- Lower volatility in returns than peers
- Moderate risk investors, with at least a five-year horizon
A portfolio tilted towards large-cap stocks, returns that beat the benchmark and peers across every market cycle, and a focus on quality and valuations make Mirae Asset India Opportunities a good fund for investors who do not want to take too much risk.
The fund was a diversified or a multi-cap equity fund investing across market capitalisations. Even so, it always maintained a bias of around 70% of its portfolio towards large-cap stocks. In the past year, the fund further hiked the large-cap share with the result that it is now on par with a large-cap fund. In the past year, its average large-cap holding of 80% is comparable to funds such as Birla Sun Life Frontline Equity, Invesco India Growth, or Reliance Top 200.
Against the large-cap category, Mirae Asset India Opportunities (Mirae Opportunities) returned 4-5 percentage points more than the average in the 1, 3, and 5-year time frames. This may not be surprising given its earlier multi-cap strategy. But even against diversified funds, where the average large-cap share is 62%, the fund has beaten the 1-year average return of 27% by a solid margin of 4 percentage points. In the longer 3-year and 5-year time frames too, the fund is above average.
The fund is also a good fit for any long-term portfolio.
Staying at the top
Mirae Opportunities was launched in April 2008, so it spent a good part of the 2008 slide in cash and this helped contain losses. Even so, in every market cycle since 2008 – be it the surge of 2009-10, the correction in 2011, the upswing in 2012, the flat 2013 – the fund delivered returns better than the average for both diversified and large-cap funds. In 2011 and 2013 cycles, it in fact did better than even large-cap funds. Its Sortino ratio, which measures downside deviation (risk) in returns, is better than both large-cap and diversified funds.
On a 1-year and a 3-year rolling return basis since inception, the fund has beaten its benchmark BSE 200 index all the time. This shows its consistency in performance in both the short term and long term. The fund has also beaten the diversified and large-cap category average all the time on a 3-year rolling return in the past five years.
Owing to the historically higher share of mid-caps compared to the large-cap category, Mirae Opportunities is more volatile but not significantly so. Compared to the diversified category, its volatility is well below the category’s average. On risk-adjusted returns, measured by Sharpe, Mirae Opportunities scores near the top in both large-cap and diversified funds.
Portfolio and strategy
Mirae Opportunities tends to follow a long-term, growth-at-reasonable-price approach, focusing on quality of management and business. The fund keeps a low portfolio churn, and does not significantly deviate from the sector weights of its benchmark BSE 200. It juggles stock selections within each sector to deliver market-plus returns.
In financial services that is the top sector holding, the fund holds only private sector banks that have grown steadily, such as Kotak Mahindra Bank and IndusInd Bank, besides NBFCs. The fund has upped holding in this sector by a good margin in the past year.
Apart from this hike, the most significant portfolio change in the past year is a sharp cut in software and pharmaceuticals. In other sectors, the fund has more or less maintained exposure through the year, though the portfolio has a slight tilt towards the consumption side.
Holding in automobiles, FMCG, and consumer durables has held steady. The fund has juggled with stocks within this, such as adding to ITC, Asian Paints, and Bajaj Auto, reducing in Motherson Sumi and Tata Motors while booking profits and exiting HSIL, Amara Raja Batteries, and Britannia. Besides this, the fund selectively added cyclical stocks that have strong balance sheets and are in the best position to grow on an infrastructure and investment revival. For example, it upped holding in stocks such as L&T, Adani Ports, Power Grid, CESC, Vedanta, Tata Steel, and some cement stocks. The fund is thus positioned to grow from both sustained consumer growth and a cyclical revival.
The fund is managed by Neelesh Surana, who has been handling the fund since its inception. This provides comfort on the continuance of the fund’s strategy and performance despite exit of the AMC’s chief investment officer, Gopal Agrawal. The fund has an AUM of Rs 3,197 crore.
FundsIndia’s Research team has, to the best of its ability, taken into account various factors – both quantitative measures and qualitative assessments, in an unbiased manner, while choosing the fund(s) mentioned above. However, they carry unknown risks and uncertainties linked to broad markets, as well as analysts’ expectations about future events. They should not, therefore, be the sole basis of investment decisions. To know how to read our weekly fund reviews, please click here.