L&T Midcap Fund : Fund Review

A scheme which has a portfolio of second-tier stocks in their sectors especially from the universe of mid-sized companies works as good as a large-cap scheme. A key reason being the focus on the next best option in a given sector once the fund manager has crossed the stipulated limit for large-sized companies. Creating such a portfolio stands in good stead even for conservative investors because having the second rung of companies from a given sector in a portfolio improves the scope of outperformance and helps protect the downside due to relatively low volatility in such companies.

One such scheme is L&T Midcap scheme. The scheme is a consistent performer despite being in a highly volatile category of mid-sized companies. In the past five-year and 10-year periods, the scheme has delivered 25% and 23.2 % returns respectively, while its benchmark index Nifty Midcap 100 TRI has given 19.6% and 19% returns over the same periods, respectively. Its peers in the mid-cap category have delivered 20.8% and 21.8% returns in the past five- and 10-year periods, respectively.

In the past six months, the scheme’s fund managers Soumendra Nath Lahiri and Vihang Naik have spread their investments across diversified sectors ranging from financials to construction with more or less same weightage of exposure. This is a sensible strategy in the present market conditions wherein earnings’ growth is in select sectors. Conservative investors who intend to take advantage of growth stories in mid-sized companies which have well-placed business models and attractive return ratios, they can consider investing in this scheme with a horizon of at least three years.

Portfolio Change (Past 6 months)
New entrants	Complete exits	Increase in allocation
Future Retail	Brigade Enterprises	Kajaria Ceramics
ICICI Securities	Avanti Feeds	ACC
NALCO	OCL India	Torrent Pharmaceuticals
Odisha Cement	Sobha	Gujarat Pipavav Port

Returns (%)	CAGR Return	SIP CAGR Return	Multicap Fund Average CAGR Return
1-Yr	-8.85	-11.63	-8.66
3-Yr	14.63	9.59	10.63
5-Yr	25.5	16.04	19.78
Returns Peer Comparison	1-Yr	3-Yr	5-Yr
DSP Midcap Fund	-6.95	13.11	22.16
HDFC MidCap Opportunities Fund	-7.86	12.8	21.9
Invesco India MidCap Fund	-3.25	12.54	21.83
Source: Accord Fintech, Compiled by ETIG Database

Expert Take
Suresh Sadagopan, founder, Ladder7 Financial Advisories

L&T Midcap seeks to invest in mid-cap stocks to offer long-term capital appreciation. The fund manager is an experienced hand and has steered the fund well. The fund is very well diversified and has offered an excellent performance as compared to the category and the MidCap Index, since its launch in 2013, except in the current year. The fund’s risk-return metrics are favourable and makes it a good choice among mid-cap funds.