Dalal Street Investment Journal - July 09, 2019

68 DALAL STREET INVESTMENT JOURNAL I JULY 8 - 21, 2019 DSIJ. in^

Cover Story

MF page - 02

Multi-Cap funds invest across categories of equity

like large-cap, mid-cap and small-cap and that too in

a proportion which the fund manager feels suitable.

However, what if you create a portfolio of large-cap,

mid-cap and small-cap funds? DSIJ studies and

explains what should be your approach, i.e., whether

to go for multi-cap funds or create a personalised

portfolio of large-cap, mid-cap and small-cap funds.

L

ast one-and-half year has not been very kind to mutual

fund investors. First we saw equity investors losing

their money due to correction in the equity markets in

year 2018 after the reintroduction of long term capital

gain tax. Once the market was coming out of this turmoil, it

was hit by the debt market crisis, which led to losses to

investors in their debt portfolios. We are still not out of woods;

however, there are some pockets of opportunities emerging.

One of these is the multi-cap funds, which have outperformed

other categories in the last three months ending June 2019. On

an average these funds have performed better than any other

equity category of mutual funds, except for sectoral funds. This

outperformance has also attracted higher monthly inflows into

this category. According to the data published by industry

body, Association of Mutual Funds in India, in the last two

months, the net inflow in multi-cap funds has been to the tune

of `2521 crore, higher than any other equity category such as

large-cap, small-cap and mid-cap during the same period. So,

is it the right time to invest in multi-cap funds and are they

going to outperform other categories? Before that, let us

understand what are multi-cap funds.

Multi-cap funds

According to the SEBI’s circular, a multi-cap fund is a fund

which can invest across market caps while having a minimum

of 65 per cent of total assets in equity and equity-related

instruments. This means that they can invest not only in

large-cap stocks, but also mid-cap and small-cap stocks and

that too in any proportion the fund manager may deem fit.

Hence, if a fund manager believes that large-cap stocks are

going to generate better returns, he can change the constituents

of his portfolio accordingly. A study of the current portfolio

constituents of multi-cap funds shows that larger weightage is

given to large-cap stocks which, in general, have performed

better in the last one year or so. The fund manager can also

Multi-Cap Funds vs Large-Cap,

Mid-Cap and Small-Cap Funds