Sunil Singhania led Abakkus Mutual Fund has launched its third equity NFO Abakkus Large & Mid Cap Fund, which is open for subscription and will close on July 29.

Investment process of this large & mid cap fund

The Abakkus Large & Mid Cap Fund seeks to identify companies with strong growth potential while aiming to enhance portfolio resilience through exposure to established large-cap businesses.

The fund house highlights that all funds of Abakkus Mutual Fund will follow an in-house investment framework viz. ‘MEETS’, to evaluate key drivers of long-term value creation. The MEETS framework focuses on Management pedigree and track record, Earnings quality and the ability of companies to multiply profits, Events/Trends that affect or disrupt operations, Timing of investment at reasonable pricing and Structural aspects like size of the opportunity and competitive positioning.

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What fund house says on launch of large & mid cap fund:

Sunil Singhania, Founder: As India’s economic landscape continues to evolve, it is creating compelling opportunities across both established market leaders and emerging businesses with the potential to become tomorrow’s champions. The Large & Mid Cap category is uniquely positioned to capture this opportunity, offering investors access to growth-oriented companies while also benefiting from the relative resilience typically associated with large-cap businesses.

Vaiibhavv Chugh, CEO: India's long-term structural growth story remains promising despite short-term global headwinds. As markets transition towards an earnings-driven environment, we believe investors should focus on businesses with strong fundamentals and long-term growth potential. The Large & Mid Cap category offers a compelling balance by combining the strengths of established market leaders with the growth potential of emerging companies.

Pratish Krishnan, Senior Fund Manager: The current equity market environment presents an attractive opportunity for disciplined long-term investors. While corporate earnings have remained resilient, market valuations in certain segments have moderated following recent market corrections, creating a favourable backdrop for active stock selection. We believe such market conditions underscore the importance of a research-driven investment approach.

What experts say about the fund

Experts typically ask investors to avoid investing in NFOs unless they offer something unique. The uniqueness could be that the scheme is offering an investment option that is not available in the market or offering something extra to an existing option. Otherwise, the experts believe investors are better off with an existing scheme with a long performance record. This is because you have some historical data to base your investment decision. You don’t have any data when it comes to new offerings.

Jasmeet Singh, Executive Director, Anand Rathi Wealth Limited told ETMutualFunds that Abakkus Large & Mid Cap Fund follows an active, research-driven strategy and the fund manager also has the flexibility to allocate up to 30% to debt, gold or silver, which can help manage risk during volatile market conditions.

However, at a broader level, this fund's investment mandate is similar to other funds in the large & mid-cap category and the real differentiator is the fund manager's strategy, particularly how they select stocks, construct the portfolio and manage risk, Singh further said.

Rajani Tandale, SVP - Mutual Fund and Partner, 1 Finance shared with ETMutualFunds that instead of going for other market cap based categories, for most individual investors, a well-established flexi Cap fund is sufficient on its own, it already gives the fund manager full freedom to move across large, mid and small caps based on live conviction, and its Rs 5 lakh crore+ category AUM, and one should avoid this NFO specifically: with no track record, there's no way to judge how the fund manager will actually behave through a market cycle.

The performance of the fund will be benchmarked against Nifty Large Midcap 250 TRI and will be managed by Pratish Krishnan and Abhishek Krishnaswami Srinivas.

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The fund will allocate 70-100% in equity and equity related instruments, 0-30% in debt securities (including securitised debt & debt derivatives), money market instruments, and gold and silver instruments and 0-10% in units issued by InvITs.

Time to choose large & mid caps?

Tandale said it's also structurally rigid, the large & mid cap mandate forces a minimum nearly 35% mid-cap allocation regardless of the manager's own conviction, unlike flexi cap where that call is earned, not forced.

Singh said that investors should invest based on long term strategy, rather than looking at short term market movements and due to recent corrections, we can see that Nifty 50 is currently fairly valued, while Nifty Midcap 150 is trading around 10% below its fair value, proving that it is a good entry point.

He further said that investors can opt for either lump sum or SIP in diversified categories based on fund availability and if surplus funds are available and they have a long-term horizon, lumpsum can be considered and if not, stagger the investment as SIP is suitable for individuals with a regular income, and stepping up your SIP annually can help you reach your goals faster.

Suitable for first time investors?

There are many first-time investors who are willing to allocate in the categories which offer high returns, have low or high risk, and offer tax benefits. There are many new investors who are wondering where to invest amid the market volatility, geopolitical tensions and other factors.

According to the SID of the fund, the fund is suitable for the investors who are seeking long term capital appreciation and want investment predominantly in large cap and mid cap stocks.

Singh said that investors should generally avoid investing in NFOs as they lack a performance track record and the fund manager’s strategy is often unclear and unlike IPOs, NFOs offer no price advantage.

He further said that investors have a wide range of funds available under the large and mid category with proven track record to choose from and they should stick to their long term strategy and have a balanced allocation of 55% in large caps for stability, and the rest invested in mid and small caps for growth.

To this, Tandale said that given the lack of track record and a more restrictive mandate, I would not advise investing in this fund at launch.

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How existing large & mid caps performed

Around 26 large & mid cap funds have completed three years of existence in the industry and out of these, Invesco India Large & Mid Cap Fund delivered the highest return of 23.06% in the last three years.

Motilal Oswal Large & Midcap Fund delivered 21.95% and Tata Large & Mid Cap Fund gave the lowest return of 8.04% in the same period.

Singh said the outlook for the large & mid cap category remains positive and recent market corrections have brought valuations to more reasonable levels and more importantly, earnings growth looks strong with Nifty 50 companies expected to deliver full-year earnings growth of around 12% in FY27 and 14% in FY28, while Nifty Midcap 150 companies are projected to grow earnings by around 18% in FY27 and 16% in FY28.

India's broader macroeconomic environment also remains supportive as domestic consumption continues to strengthen, driven by a growing middle class, rising urbanisation and increasing formalisation of the economy. Hence, this creates a favourable backdrop for long-term investors in diversified equity categories, he further said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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