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The Alchemy! How fund managers’ craft in supercharging large cap funds with mid and small-cap magic

The landscape for large-cap funds has recently undergone a notable shift, with a significant improvement in their performance. After facing challenges in surpassing benchmark indices from 2018 to 2022, large-cap funds have shown a strong comeback post-2022. Thanks to a thriving equity market in 2023, data from ACEMF indicates that around two-thirds of actively managed large-cap funds have managed to outperform their benchmarks.

One key factor contributing to this success is the strategic management of the 20% portion of their corpus that fund managers can invest outside the large-cap segment. By exploring opportunities in small- and mid-cap stocks, these managers aim to capitalize on the potential for higher returns. Recent data reveals significant allocations towards mid and small-cap stocks within the large-cap category.

These carefully chosen mid and small-cap stocks play a crucial role in boosting the returns of large-cap funds, positioning them favorably against benchmark indices. Highlighting some of the most favored mid-cap stocks among 31 active large-cap funds, portfolio data from ACEMF as of March 31, 2024, shows the following:

– Samvardhana Motherson International: Held by 12 large-cap funds, including DSP Top 100 Equity, Groww Largecap, and SBI BlueChip.
– Hero MotoCorp: Supported by 10 large-cap funds, such as JM Large Cap, ICICI Pru Bluechip, and Bank of India Bluechip.
– Info Edge (India): Attracting investment from 9 large-cap funds, including Taurus Large Cap, Axis Bluechip, and UTI Large Cap.
– The Indian Hotels Company: Backed by 8 large-cap funds, including Nippon India Large Cap, Baroda BNP Paribas Large Cap, and PGIM India Large Cap.
– Cummins India: Garnering support from 7 large-cap funds, such as Groww Largecap, SBI BlueChip, and Union Largecap.

In addition, other mid-cap stocks like The Phoenix Mills, PI Industries, Sona BLW Precision Forgings, FSN E-Commerce Ventures, and Zydus Lifesciences are also seeing significant interest from large-cap funds.

This strategic focus on mid and small-cap stocks showcases the proactive approach taken by fund managers to potentially boost returns and outperform benchmarks in today’s evolving market environment. DailyBubble believes that this shift in strategy is a positive sign for the performance of large-cap funds in the future.

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