Market volatility during 2022 impacted the performance of mutual funds across the board. However, overall, large caps funds recovered sharply from the September lows and outperformed, whereas mid-cap and small-cap funds started outperforming in December.
Markets were also very volatile in 2022 amid major global headwinds including the Russia-Ukraine war leading a steep rise in inflation and aggressive monetary tightening by major central banks.
Even though the markets Indian witnessed a sharp recovery in October and November, they again turned volatile in the last month of 2022. In December, Nifty lost around 3 percent while for the year, it is up around 5 percent.
Inflows into equity funds also declined sharply during the year. From the highs of ₹18,500 crore in May 2022, inflows have declined consistently as investors turned cautious.
Amid this backdrop, domestic brokerage house IIFL Securities has picked 3 mutual funds for 2023. Let's take a look:
Canara Robeco Blue Chip Fund: Launched in 2013, Canara Robeco Blue Chip Fund aims to invest in high-quality blue chip companies across Large and Mid cap space. The fund has given 5 percent returns in the last 1 year and 17 percent returns in the past 3 years. The fund holds a spectacular long-term performance track record that speaks for its success, noted the brokerage. The portfolio is well diversified thus it has the ability to control the losses during the falling market is high, it added. It invests over 80 percent in Large-cap stocks and also aims to combine the consistency of large-caps as well as mid-cap ideas, said IIFL. As per the brokerage, the investment strategies followed by the fund have earned it the tag of being a consistent performer that has rewarded long-term investors well across various market phases.
ICICI Prudential Focused Equity Fund: Launched in 2009, ICICI Prudential Focused Fund is an open-ended equity scheme investing in a maximum of 30 stocks across market capitalization. It has given a 10.5 percent return in the last 1 year, 22.9 percent in 3 years, and 13.7 percent in 5 years. IIFL stated that the scheme follows a bottom-up approach for identifying stocks that have robust business financials, above-average profitability and sustained competitive advantages. The scheme will remain sector agnostic and will maintain an overweight stance on select high-conviction themes/sectors that are expected to outperform in the current economic cycle, it added. As per the brokerage, the scheme is suitable for investors who are seeking long-term capital appreciation and diversified exposure across market cap with an investment horizon of 5-plus years.
DSP Flexi Cap: The fund invests flexibly across carefully selected companies of different sizes- Large, Mid and Small Cap and aims to own quality business, growth potential and reliable management. Even though it has fallen around a percent in the last 1 year, it has advanced 16 percent and 12 percent in the last 3 and 5 years, respectively. As per the brokerage, the Investment Manager prefers adopting a top-down approach with regard to investment in equity and equity-related securities. This approach encompasses an evaluation of key economic trends, an analysis of various sectors in the economy leading to an outlook on their future prospects and a diligent study of various investment opportunities within the favoured sectors, it explained. IIFL further noted that the fund conducts in-house research in order to identify both value and growth stocks. The analysis will focus, among other things, on industry and company fundamentals and valuation metrics. The quality or strength or management would be a key focus area.
Investing in a Flexi cap fund is a smart way of owning multiple businesses selected by the fund managers instead of hunting top stocks, the fund offers the potential to grow wealth by diversifying the portfolio across market cap which can help the investor build a strong portfolio and consistent returns, said IIFL.