Looking for a steady scheme that can sail you across the current frenzied markets with a fair degree of safety?
Consider L&T Equity, given its proven record of delivering steady returns over the long term.
The fund may not deliver spectacularly, but can be trusted to provide reasonable returns with relatively low risks.
L&T Equity has outpaced its benchmark BSE-200 over one-, three- and five-year timeframes. The scheme has generally outperformed its benchmark by 3-8 percentage points.
In the last five years, the scheme has delivered a compounded annual return of 16.3 per cent, which places it in the top quartile of funds in its category, and higher than peers such as Birla Sun Life Equity, BNP Paribas Equity and IDFC Equity.
L&T Equity is a predominantly large-cap fund, though it does take significant exposure to mid-caps as well.
This mix ensures adequate outperformance across timeframes. The fund takes a non-concentrated approach, with diffused holdings across a wide range of stocks.
The scheme is suitable for investors with a moderate risk appetite, looking for a diversifier to build a long-term portfolio. You can opt for the systematic investment plan route to take exposure in the fund.
Portfolio and strategy
L&T Equity’s allocation to mid-cap shares (less than ₹7,500 crore market cap) is generally restricted to 15-20 per cent of the portfolio.
Banks, financial services and software have always been the top few sectors the fund holds. Over the last 12-18 months, it has also increased exposure to petroleum products, cement and auto ancillaries.
This increased focus on cyclicals has helped it gain from the recent rally. In general, the scheme participates reasonably in rallies and contains downsides well during declines. Allocation to sectors also hinges mostly on valuations.
The scheme takes cash positions of 6-7 per cent of the portfolio during volatile and falling markets, which can increase to over 10 per cent in case of highly corrective phases.
Diffused holdings
L&T Equity also takes a diffused approach to stock allocation. It holds 55-60 stocks most of the time, with considerable diversification in holdings.
Individual stocks rarely account for more than 5 per cent of the portfolio, even among the top holdings.
A good portion comprises stocks from the Nifty and BSE 100 basket, which have reasonably stable earnings outlook.
Thus, the fund takes a relatively safe approach without losing out on returns, making it a good bet for those with a moderate risk appetite.
Apart from the top Sensex/Nifty stocks, names such as Tech Mahindra, ING Vysya Bank, Texmaco Rail, VA Tech Wabag, Gujarat Pipavav and Wabco India figure prominently in the portfolio.
This article was originally published in >The Hindu Business Line.
