Large cap mutual fundHSBC Mutual Fund is introducing a large and midcap fund, HSBC Large and Mid Cap Equity Fund. The NFO will open for subscription on March 11 and will close on March 25, 2019; The fund will reopen on April 4 for continuous sale and repurchase.

As the name suggests this scheme will invest in large cap as well as midcap stocks. AMC says, “Recent improved earnings, reasonable valuations, low inflation and interest rate trend are showing encouraging signs for equity investments. Investments in equities have delivered 16% CAGR over a 40-year investment period. Large Caps offer lower probability of delivering negative returns within equities and thus can reduce volatility while Mid Caps offer probability of delivering high growth. Optimal mix of Large Caps and Mid Caps can deliver higher growth with lesser volatility.”

There are total of 24 funds in the large and midcap category having total AUM of Rs 47,239.49 crore. Mirae Asset Emerging Bluechip Fund is the largest fund in the category with AUM of over Rs 6,300 crore and Quant Large and Mid Cap Fund has the lowest AUM over Rs 4 crore.

Large & Midcap category has delivered -0.67% returns on one year basis (as on 8th March, 2019) and CAGR returns of 13.86% over a three-year period. Mirae Asset Emerging Bluechip Fund is the top performer fund over one year and three year period with returns of 6.31% and 21.25% respectively. Even the least performing fund, Reliance Vision Fund has delivered 8.44% CAGR returns over three year period.

Asset Allocation and Strategy

Under normal circumstances, the asset allocation of the Scheme would be as follows:

Instruments Indicative allocations (% of total assets) Risk Profile
Equities & Equity related securities Out of which: 80-100% Medium to High
A) Large Cap Companies 35-65%
B) Mid Cap Companies 35-65%
C) Other than Large Cap and Mid Cap Companies 0-30%
Debt instruments & Money Market instruments (including Cash & Cash equivalents) 0-20% Low to medium

HSBC Large and Midcap Equity Fund is benchmarked against NIFTY Large Midcap 250 TRI. This is a well-diversified index with equal weightage and balanced exposure to both stocks, Large and Midcap. The NIFTY Large Midcap 250 reflects the performance of a portfolio of 100 large cap and 150 mid cap companies listed on NSE, represented through the NIFTY 100 and the NIFTY Midcap 150 index respectively. The aggregate weight of large cap stocks and mid cap stocks is 50% each and are reset on a quarterly basis. It offers lower volatility as the stability of large caps mitigate the volatility of the midcaps.

The NIFTY Large Midcap 250 TRI has delivered 0.66% returns over one year period and 16.3% over three year period as per data available on Advisorkhoj as on 8th March 2019.

Key Sectors that have high growth potential according to the AMC:

  • Financials
  • Consumer Discretionary
  • Materials
  • Industrials

The AMC will choose stocks basis PE-ROE Process

Neelotpal Sahai is the Fund Manager of the Scheme. He has over 25 years of experience in research and fund management. He is managing the HSBC Large Cap Equity Fund, Multi Cap Equity Fund and Small Cap Equity Fund. He is also jointly managing HSBC Equity Hybrid Fund with Kapil Punjabi.

Tax Impact:

Being an equity fund it will be eligible for Long Term Capital Gains tax of 10% for equities if held for more than one year & gains exceeding Rs 1 lakh. And Short Term Capital Gains tax of 15% will be levied for less than one year holding period.

Key features of the Fund

  • NFO Period – 11th March 2019 to 25th March 2019
  • Type of Scheme – An open ended equity scheme investing in both large cap and mid cap stocks
  • Benchmark – NIFTY Large Midcap 250 TRI
  • Min Application Amount – 5,000/- per application and in multiples of  Re 1/- thereafter
  • Plans and options – Regular & Direct Plans Under which following Options are offered

Plan options

– Growth

– Dividend (Reinvestment, Payout)

Exit Load (as a % of Applicable NAV)

– Any redemption / switch-out within one year from the date of allotment: 1%.

– No Exit Load will be charged, if units are redeemed/switched-out after 1 year from the date of allotment.

  • Risk Profile – Moderately High Risk
  • Investor Suitability – This product is suitable for investors who are seeking

– Long term wealth creation and income

– Investing predominantly in equity and equity related securities of large and midcap companies.

Rupeeiq Take: We think the current correction in equity markets bodes well for new investors seeking to start equity investments. HSBC Large & Mid cap fund will exhibit reasonable volatility owing to the midcap exposure. Thus, we think this fund is suitable for investors having long term investment horizon and moderate to high risk appetite.

Author
Priyanka Bharati

Priyanka Bharati is a senior personal finance analyst with RupeeIQ. She can be reached on priyanka.bharati@rupeeiq.com