FundsIndia Recommends: Mirae Asset India Opportunities

Investors who wish to start building an equity portfolio can add Mirae Asset India Opportunities Fund as a part of their equity holding. The fund is a good option for investors seeking market opportunities without taking on undue risks. Its bias for large caps, ability to contain downsides and consistent performance since inception makes it a good choice. With a return of 26 per cent in the last three years, Mirae Asset India Opportunities comfortably beat its benchmark – BSE 200’s return by 9 percentage points.

Suitability

Mirae Asset India Opportunities is suitable for investors whose risk appetite is not high. You may consider the fund to be one notch higher than large-cap funds in terms of its risk-return profile, and lower than other opportunity funds like Reliance Equity Opportunities. UTI Opportunities too, in recent times, sports a more large-cap biased portfolio.

That said, Mirae Asset India Opportunities still has a less-than-seven-year record, having been launched only in March 2008. It may not have witnessed the full magnitude of the 2008 fall as it held 15-20 per cent in cash in its initial months after launch. Also, it has not tested spectacular rallies like the one in 2006-07. Still, its robust returns in 2009 and 2014, and its ability to contain declines in 2011 speak for the fund.

If you wish to invest in the fund, then opt for the growth plan and invest through Systematic Investment Plans (SIPs) with at least a three-year perspective.

Performance

Mirae Asset India Opportunities’ one-year returns, rolled every day since its launch, suggests that the fund beat its benchmark 99 per cent of the times. That is a sound record. In addition, its average one-year returns based on rolling it daily is 24 per cent, as against 14 per cent by the BSE 200. This record means that the fund can generate benchmark-beating returns irrespective of when you invest.

Had you started a Rs. 10,000-a-month SIP in the fund since its inception, you would have a handsome Rs. 19.4 lakh today. That’s an annual yield of 25 per cent. The benchmark, BSE 200 Index, on the other hand, would have fetched just Rs. 14.4 lakh; that’s an Internal Rate of Return (IRR) of 16 per cent annually.

As on February 20, 2015.

Over the last three years, the fund beat most peers except Reliance Equity Opportunities. The latter’s three-year returns was 3 percentage points higher. Higher exposure to mid and small-cap stocks by the Reliance fund is the primary reason for such outperformance. Reliance Equity Opportunities holds about 50 per cent of its assets in large-cap stocks of over Rs 10,000 crore-market cap, as against Mirae Asset India Opportunities’ holding of 75 per cent. Mirae Asset India Opportunities kept pace with UTI Opportunities over a three-year period, what with UTI too favouring large-cap stocks.

In fact, the fund managed to beat UTI Opportunities in the 2009, 2010, and 2014 rally, suggesting that it has a higher correlation with market movements when compared with UTI Opportunities. Simply put, it may deliver more in rallies when compared with the UTI fund. In a fall (such as the one in 2011) though, while Mirae Asset India Opportunities did exceedingly well in containing declines, UTI Opportunities did a better job.

Portfolio

Mirae Asset India Opportunities has a blend of large and mid-cap stocks. The fund maintained the average large cap (market cap of above 10,000 crores) exposure of 73 per cent in the last five years. It seldom moves to cash and tries to stay fully invested in equities (at around 94-96 per cent). Mirae Asset India Opportunities has consistently adopted a buy and hold approach since inception. It also sports a low portfolio turnover ratio (just 0.53 times).

As of January 2015, 79 per cent of the fund’s total equity holdings were in large-cap stocks. The rest were in mid and small-cap stocks. Mirae Asset India Opportunities has adequately diversified its portfolio by holding 55 stocks from 22 different sectors. Its top 10 holdings account for 39 per cent of its portfolio.

Over the last one year, Mirae Asset India Opportunities stocked up on banking scrips, some of which delivered well; it also reduced its stakes in IT stocks. It increased exposure to another cyclical sector, i.e., engineering and capital goods. Currently, the fund is overweight on banking, IT, pharma and auto sector stocks.

ICICI Bank, HDFC Bank, L&T, Infosys and SBI were some of its top picks in the large cap space. Tech Mahindra, IndusInd Bank, Amara Raja Batteries, Gateway Distriparks and JK Cement were its top picks in the mid-cap space.

Mirae Asset India Opportunities is managed by Neelesh Surana and Sumit Agrawal. Its asset size has steadily grown and now stands at Rs 937 crore.

Stock Strategies

Mirae Asset India Opportunities invested in Motherson Sumi Systems (in August 2009) and accumulated it until it exited the stock in November 2014. The fund has benefited from this long-term investment strategy by delivering 10X returns from that stock in the last 5 years.

The fund also invested in Cadila Healthcare in February 2012 and exited in January 2015 as valuations soared. The pick delivered triple digit returns in 3 years.

Similarly, Mirae Asset India Opportunities invested in the Transport Corporation of India in April 2014 and exited in December 2014 by booking triple digit returns in 9 months, suggesting that it takes active short-term calls as well.

Mirae Asset India Opportunities also has a sound exit strategy. It exited Cairn Energy in August 2014, much before its steep fall in November and December 2014, by cutting losses on time.

The fund also does some bargain hunting. It picked Sun TV network in September 2014, when its prices were falling due to losses from the group’s holding – Spicejet. The fund is now sitting on gains from the media stock.

*Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not indicative of future results. To know how to read our weekly fund reviews, please click here.