Despite the uncertainty of the US election outcome being out of the way, foreign investors have continued with their selling spree over the past month and a half, sending benchmarks hurtling downward.
However, several pockets in large-caps are available at reasonable valuations. Also, the recent bout of market fall presents attractive entry points to the large-cap segment from a long-term perspective.
Flexi-cap and large-cap funds usually occupy a significantly large portion of investor portfolios, especially those not wanting to take inordinate risks, and preferring relatively lower volatility.
Invesco India Largecap is a fund that investors can consider from a long-term perspective of 7-10 years
The fund has a track record of over 15 years and has delivered healthy benchmark and category-beating returns over the long term.
Taking the SIP route for taking exposure to the fund would help average costs and reduce portfolio volatility.
Significantly beating the benchmark
Large-caps in general have struggled to beat the benchmark Nifty 100 TRI or the BSE 100 TRI, especially after market regulator SEBI brought in rigorous categorisation and investment norms. Invesco India Largecap has, however, managed to consistently beat the Nifty 100 TRI over the years.
Over the past 1-year, 3-year, 5-year and 10-year timeframes the fund has delivered 35.3 per cent, 13.9 per cent, 19.4 per cent and 14.6 per cent, respectively on a point-to-point basis. The scheme outperformed its benchmark by 2-3 percentage points over the medium to long term.
When five-year rolling returns over the past the period January 2013 to October 2024 are considered, the fund has delivered mean returns of 14.2 per cent. For comparison, the Nifty 100 TRI delivered average returns of 13.2 per cent.
Also, in the aforementioned period, on a 5-year rolling basis, the scheme has beaten its benchmark Nifty 100 TRI over 74 per cent of the time. It has delivered more than 12 per cent over 71 per cent of the time during this period and more than 15 per cent for nearly 45 per cent of the time.
The fund’s SIP returns (XIRR) over the past 10 years are healthy, at 17.2 per cent. An SIP in its benchmark Nifty 100 TRI would have returned 15.5 per cent over the same period.
All return figures pertain to the direct plan of the fund.
Invesco India Largecap fund has an upside capture ratio of 106, indicating that its NAV rises significantly more than the benchmark during rallies. The scheme has a downside capture ratio of 94.2, suggesting that the scheme’s NAV falls less than the Nifty 100 TRI during corrections. A score of 100 indicates that a fund performs in line with its benchmark. These observations are based on data from November 2021 to November 2024.
Steady holdings
Invesco India Largecap invests 80-85 per cent of its portfolio in large-cap stocks, in keeping with its mandate. About 12-17 per cent of its holdings are in mid and small caps, which have helped the fund in delivering outperformance over the benchmark and many peers.
The exposure in large-cap stocks is reserved for the top few companies in any given sector.
A reasonable degree of value focus, mixed with a GARP (growth at reasonable price) view defines the fund’s holdings.
Banks and IT software firms have been the top sectors held by the fund across market cycles. Automobiles were among top holdings earlier, but have been trimmed in recent months. Petroleum products and consumer durables figure prominently in the portfolio. Keeping weightage to the underperforming FMCG segment over the past couple of years has helped the fund.
The fund generally holds around 45-55 stocks in its portfolio, with exposure to individual firms rarely crossing 4 per cent barring the top few holdings.
Invesco India Largecap avoids cash and debt calls even when markets are volatile. The fund usually avoids taking heavy positions. The fund remains invested across most market cycles and cash/debt are restricted to 1-2 per cent of the portfolio.
The fund is suitable for investors with a medium risk appetite. Investors saving for financial targets that are 7-10 years away can opt for the systematic investment route.
The scheme can be a part of the core portfolio or a key component as a diversifier in the satellite portion.
Overview
Investors with a medium risk appetite can consider a long-term perspective of 7-10 years
The fund has delivered healthy benchmark and category-beating returns over long term
Taking SIP route for exposure would help average costs and reduce portfolio volatility
