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The Secret Of Mirae Asset India Equity Fund's Increasing Popularity - Outside View by PersonalFN

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The Secret Of Mirae Asset India Equity Fund's Increasing Popularity
Sep 7, 2018

Mirae Asset India Equity Fund (erstwhile Mirae Asset India Opportunities Fund) is the flagship fund of Mirae Asset Mutual Fund. Though classified under Multi Cap Funds category, it is primarily an opportunities style fund that has flexibility to invest in stocks of companies across market capitalizations and sectors depending on their attractiveness. The fund aims to help investors gain from sector or stock specific opportunities. The prudent investment strategies followed by the fund has earned it a tag of being a consistent performer that has rewarded long-term investors well across market cycles.

Launched just ahead of the 2008 subprime crisis, Mirae Asset India Equity Fund suffered a huge loss in its initial year itself, dragging down the funds NAV to as low as Rs 5.48 (on 09 March 2009), a loss of about 45% on its face value. However, the fund was quick to recover its losses in the swift market rally that followed. Despite being in existence for over 10 years now, the fund seems to have started gaining popularity only in the last couple of years. While it took almost 7 years for the fund to reach the 1,000 crore mark, the funds AUM has grown 8 folds in the last 3 years. This clearly indicates that not many investors identified the true potential of the fund, until it made a mark for itself through its remarkable performance.

The fund manager Neelesh Surana aims to outperform the benchmark and follows a rigorous investment process that leads to alpha generation. He looks at business on various quantitative and qualitative parameters and gives high importance to quality and scalable business run by credible management. He looks for growth businesses, but then again evaluates the value before buying into them. Managing Mirae Asset India Equity Fund since August 2014, Neelesh has done well to meet the expectations of its investors in terms of returns.

Fund Facts - Mirae Asset India Equity Fund
Category Multi Cap Fund Style Blend
Type Open ended scheme Market Cap Bias Multi Cap Fund
Launch Date 9-Apr-08 SI Return (CAGR) 16.70%
Corpus (Cr) Rs 8,531 Min./Add. Inv. Rs 5,000 / Rs 1,000
Expense Ratio (Dir/Reg) 1.32% / 2.10% Exit Load 1%
Portfolio Data as on July 31, 2018
SI Return as on September 04, 2018
(Source: ACE MF)

Growth Of Rs 10,000, Invested In Mirae Asset India Equity Fund 5 Years Ago

Mirae Asset India Equity Fund has been a steady long term performer. Its performance over the last 5 years has been commendable. With a CAGR of over 25% in the last 5 years, the fund has outperformed the benchmark S&P BSE 200-TRI by about 6 percentage points. Rs 10,000 invested in the fund five years back would have by now tripled to Rs 30,886, while a similar investment in its benchmark would have been valued at Rs 24,440. The funds focus on holding quality stocks in its portfolio has helped it stay much ahead of its benchmark.

Mirae Asset India Equity Fund: Year-on-Year Performance

What makes Mirae Asset India Equity Fund stand out is its consistency to perform across market conditions. While it has delivered superior returns during market rallies, the fund has proven its ability to cap losses during market downturns. This trend is clearly visible in its year on year performance track record. Mirae Asset India Equity Fund has beaten the benchmark S&P BSE 200 - TRI in 9 out of the last 10 calendar years. However, in the current calendar year the fund has been going through a tough phase where it has trailed the benchmark by about 3 percentage points. This seems to be a temporary underperformance, given its ability to outperform the index consistently. Barring the current calendar year, the fund has delivered better returns than its benchmark in almost all the years since its inception.

Mirae Asset India Equity Fund: Performance vis-a-vis Category Peers

Scheme Name Corpus
(Rs Cr)
1 Year (%) 2 Year (%) 3 Year (%) 5 Year (%) Std Dev Sharpe
Motilal Oswal Multicap 35 Fund 13,861 22.62 24.56 19.35 -- 14.06 0.16
Principal Multi Cap Growth Fund 690 25.38 25.38 16.22 22.60 16.34 0.17
Aditya Birla SL Equity Fund 9,749 17.85 23.02 15.92 23.63 13.59 0.17
SBI Magnum Multicap Fund 5,850 20.54 20.54 15.91 22.59 12.95 0.17
Invesco India Multicap Fund 551 23.26 21.63 15.36 26.68 15.26 0.14
Kotak Standard Multicap Fund 21,271 19.00 21.44 15.22 22.50 12.60 0.19
Mirae Asset India Equity Fund 8,531 21.50 21.97 14.97 22.40 13.30 0.19
Parag Parikh Long Term Equity Fund 1,186 21.55 18.35 14.06 20.59 9.85 0.23
BNP Paribas Multi Cap Fund 891 21.29 20.15 14.02 20.62 14.08 0.10
Edelweiss Multi-Cap Fund 102 25.74 21.96 13.56 -- 14.67 0.14
ICICI Pru Multicap Fund 2,888 15.16 18.13 12.98 20.16 12.57 0.15
DSP Equity Fund 2,672 19.21 20.12 12.33 19.18 14.91 0.12
Franklin India Equity Fund 11,832 16.09 16.17 12.20 20.45 11.73 0.12
HSBC Multi Cap Equity Fund 637 18.93 19.55 12.14 20.77 14.68 0.13
IDFC Multi Cap Fund 5,678 18.49 15.92 11.39 21.21 13.49 0.07
L&T Equity Fund 2,798 18.67 18.19 11.23 18.84 13.14 0.11
HDFC Equity Fund 21,754 17.98 20.31 10.89 18.68 16.76 0.11
IDBI Diversified Equity Fund 372 18.19 14.88 10.88 -- 12.14 0.06
UTI Equity Fund 8,521 19.31 15.89 10.33 17.92 12.40 0.15
Canara Rob Equity Diver Fund 939 20.99 18.26 10.15 16.20 14.07 0.11
Baroda Pioneer Multi Cap Fund 723 16.51 16.82 9.98 16.60 13.42 0.07
Reliance Multi Cap Fund 9,732 19.71 15.61 8.79 18.51 15.17 0.04
Taurus Starshare (Multi Cap) Fund 222 14.68 15.32 8.38 14.88 14.28 0.04
Union Equity Fund 221 14.58 14.27 6.43 13.24 12.73 0.05
LIC MF Multi Cap Fund 275 11.14 11.47 4.65 12.24 15.51 -0.01
S&P BSE 200 - TRI   19.86 18.81 11.37 16.41 13.11 0.10
Returns are on a rolling basis and those depicted over 1-Yr are compounded annualised.
Data as on September 04, 2018
(Source: ACE MF)

*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

Mirae Asset India Equity Fund has been a top quartile performer. It consistently ranked among the top funds in its previous opportunities style category, while its ranking in the current multi-cap funds category is not bad either. Despite being aggressive in nature, the funds ability to limit downside and perform well even in depressing conditions differentiated it from the rest.

With a Standard Deviation of 13.30, the funds volatility has been nearly in line with the benchmark (13.11), but reasonable when compared to its category peers. Moreover, the Sharpe Ratio of the fund at 0.19 has been one of the best in the category and much ahead of its benchmark (0.10). Its ability to deliver superior risk-adjusted returns for its investors has been commendable.

Investment Strategy of Mirae Asset India Equity Fund

Mirae Asset India Equity Fund follows a combination of top down and bottom up approach to stock picking and endeavours to invest in companies which have a chance of benefiting from economic growth and structural changes happening in the country. The fund has proven its ability to timely identify sector and stock specific opportunities.

The fund usually holds a large cap bias with some allocation towards mid cap stocks and invests in a well-diversified portfolio of about 55-65 stocks. Mirae Asset India Equity Fund has a tendency to vary its investment strategies depending on the external factors. It resists from following any market momentum and stays fully invested at most of the times. The fund has a history of taking timely sector bets. The cyclical bets taken by the fund manager has helped increase the return generated by the fund during economic recoveries.

Mirae Asset India Equity Fund - Portfolio Allocation and Market Capitalisation Trends

Its classification under Multi cap funds category provides Mirae Asset India Equity Fund a flexibility to move across market caps depending on their valuation. However, the fund's portfolio remains inclined towards large caps (about 75%-90% of its assets) which provides the much needed stability to the fund. Over the last one year, the large-cap allocation in the fund's portfolio has ranged between 80%-90% of its assets, while the allocation to mid-caps has been in the range of 7%-15%. The fund resits from holding any exposure to small caps. Despite being a multicap fund, Mirae Asset India Equity Fund operates more like a large cap fund and holds negligible exposure to other market caps.

Mirae Asset India Equity Fund - Top Portfolio Holdings

Top 10 Stocks
Stocks % of Assets
HDFC Bank Ltd. 8.60
Reliance Industries Ltd. 6.00
ICICI Bank Ltd. 4.65
Infosys Ltd. 4.29
State Bank Of India 3.84
ITC Ltd. 3.75
Kotak Mahindra Bank Ltd. 3.62
HDFC Ltd. 3.37
Larsen & Toubro Ltd. 3.17
Maruti Suzuki India Ltd. 2.91
Top 5 Sectors

In terms of portfolio holdings, Mirae Asset India Equity Fund holds a well-diversified portfolio of about 67 stocks. The fund is not completely benchmark agnostic, as it does not deviate significantly from its benchmark. Out of 67 stocks in the portfolio at present, 58 belong to the S&P BSE 200 universe. These 58 stocks carry about 71% weightage in the index, while about 92% weightage in the portfolio.

As of July 31, 2018, the fund held its major exposure in highly liquid stocks like HDFC Bank, Reliance Industries, ICICI Bank, Infosys, SBI, ITC, Kotak Mahindra Bank, HDFC Ltd., L&T and Maruti Suzuki together accounting for about 44% of its assets. Most of these names have been prominent holdings in the fund's portfolio for well over 2 years now.

About one fourth of the fund's portfolio is skewed towards Banking, followed by I.T., Petroleum Products, Consumption and Auto together accounting for around 62% of the portfolio. The remaining portion of the fund's portfolio is diversified across range of sectors like Financials, Pharma, Engineering, Energy, Cement, Metals, Chemicals and so on. While the fund has increased its allocation to Petroleum Products, Consumption, Financials, Metals and I.T., it has reduced allocation to Transportation, Mining, Auto Ancillaries, Telecom, Cement and Power.

Major Gainers: The holdings in the Mirae Asset India Equity Funds portfolio have shown a mixed trend, in the last one year. Stocks like TCS, Hindustan Unilever, Reliance Industries, Tata Global Beverages, Info Edge (India), Dabur India, Infosys, Havells India, GAIL, Exide Industries, Kotak Mahindra Bank and Asian Paints have been amongst the major gainers in the portfolio that have appreciated in the range of 25-56% in a year's time.

Major Losers: While there were no many losers in the portfolio, few names like Tata Motors, Ceat, HPCL, JK Cement, Apollo Hospitals, The Federal Bank, Vedanta and Lupin are down 20%-40% in the last one year. However, the fund hardly held over 2% exposure in any of these stocks.

Suitability of Mirae Asset India Equity Fund

Mirae Asset India Equity Fund superior performance and consistent track record has helped it gain investor's attention. Being a prudently managed fund focusing on quality, the fund deserves decent time for it to reward its investors. While Mirae Asset India Equity Fund holds flexibility to invest across market caps, it has always held a large cap biased portfolio. Although multi-cap mandate demands slightly shift in exposure from large caps to other market caps, the fund still adheres to the mandate with a large cap bias as there being no minimum threshold to any market cap for multicap funds. Mirae Asset India Equity Funds ability to timely identify prevailing opportunities and participate in good quality businesses has helped it provide decent growth to its long term investors. However, it may disappoint investors who expect proper diversification across market caps, from a multicap fund.

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Note: This write up is for information purpose and not a recommendation to buy or sell the mutual fund scheme. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your financial planner or investment advisor.

Author: Vivek Chaurasia


This article first appeared on PersonalFN here.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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