DSPBR Small and Midcap Fund: Invest:: Business Line

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Investors can buy the units of DSPBR Small and Midcap Fund (DSPBR Small), given its track record in delivering above-average returns.

Though the markets have rallied significantly in 2012, most stocks in the mid-cap space continue to be available at fairly attractive valuations with potential for further upside. This fund may be a suitable medium for investors to take exposure to quality stocks in the small and mid-cap space.

Over one-, three- and five-year timeframes, the fund has outpaced its benchmark – CNX Midcap. The level of outperformance has been to the tune of 3-8 percentage points.

In the last five years, the fund has delivered compounded annual returns of 6.8 per cent, which places it among the top few funds in its category.

It has done better than peers such as SBI Magnum Emerging Business, Sundaram Select Midcap and UTI Midcap, over this period.

DSPBR Small takes a non-concentrated exposure to individual sectors as well as stocks. With considerable diversity in its portfolio, the fund has a relatively lower risk profile even though it invests in the volatile mid- and small-cap space.

The fund may be suitable for investors with a moderate risk appetite, who wish to diversify their portfolio and perk up their returns over the long-term. Investors can take the SIP (systematic investment plan) route to investing in the fund.

PORTFOLIO AND STRATEGY

DSPBR Small’s holding is quite diffused across stocks and sectors. The portfolio features around 60 stocks at any point in time, with exposure to individual stocks restricted to less than five per cent. Even individual sectors barely account for more than 10 per cent, barring a couple of segments.

The fund has always had finance and banks, pharma and consumer non-durables as its top sectors.

All these segments have had a good run over the past three-four years and have helped the fund outperform.

Over the past couple of years, the fund has reduced exposure to capital goods as the sector has been lackadaisical. Instead, sectors such as chemicals and construction have seen an increase in holding, indicating that the fund takes a blend of momentum and valuation while taking exposure.

The fund churns its stocks quite extensively. In the past one year, it has entered into 25 stocks, while exiting as many as 30 stocks.

DSPBR Small holds a large number of high-quality stocks that have run up significantly in recent times.

It holds stocks such as Godrej Industries, EID Parry, Eicher Motors, Tata Coffee, CMC, Arvind, Gruh Finance and Max India.

The NAV per unit of the growth option is Rs 19.02.