Skip to main content

Mutual Fund Review: Magnum Mid-cap



 

 

Magnum Mid-cap is yet to prove its mettle. The fund's high exposure to select stocks in the mid-cap space makes it a bit high on the risk scale

 

MID-CAP stocks and mid-cap oriented mutual fund schemes are like a double-edged sword. While they can make one super rich in market rallies, they can also throw one flat on the face in the downturn. Investors of Magnum Mid-cap have also faced this harsh reality in the past five years since the time fund was launched in March '05. Thus, despite the fund doing fairly well in recent times, the assets managed (AUM) by this fund today stand relatively lower than what it used to manage in 2006-07. The fund is currently managing about 330 crore of investor money.

PERFORMANCE :

To summarise the fund's performance in brief, Magnum Mid-cap has had a fantastic performance in some of the most bullish years of the market in the last five years, like in 2006 and 2007 and then again in 2009; while the meltdown year of 2008 saw the fund's net asset value (NAV) going virtually down the drain. In fact, by mid-December '08, the fund was trading at an NAV, below its face value of 10 per unit, implying that it notionally lost all what it had made in the previous three years since its launch in 2005.


   The timing for the launch of this mid-cap oriented fund, at the beginning of one of the wonderful rallies that the Indian equity markets have ever witnessed, could not have been better. It returned a whopping 52% gain in the very first year of its launch, outperforming its benchmark, the CNX Midcap's 38% returns by extremely good margins. The following years of 2006 and 2007, that witnessed the market's rally at a stupendous pace, saw Magnum Mid-cap put up an impressive performance with 47% and 71% returns respectively in these two years against CNX Midcap's 29% and 77% respectively.


   In 2008 however, Magnum Midcap was lifted off its ground as its NAV declined by almost 72% as against the decline of about 60% in the CNX Midcap in that single year alone. This was a big shot in the back for investors of this scheme as the fund plunged to its all-time low rankings after this disastrous performance.
   However, to the relief of most investors, the fund was quick to recover most of its losses in the following year 2009, as it returned about 104% against the recovery of about 99% made by the CNX Midcap. By the end of 2009, Magnum Mid-cap was trading at an NAV of 21.8, a much desired recovery after its NAV fell to almost 9 per unit in December '08.


   As far as the performance in the current calendar year is concerned, so far, the fund has delivered about 12% returns since January this year, which appears quite decent in light of the extreme volatility that the broader market indices have faced this year. The fund's benchmark, the CNX Midcap Index, has however returned about 18% returns so far in the current calendar year.

PORTFOLIO:

A mid-cap oriented fund, with just about 30 stocks in the portfolio, raises the risk quotient of the fund. Currently, the top ten holdings of the fund alone account for nearly 50% of the fund's equity portfolio, making it suitable for investors with a relatively higher risk appetite. As far as the sectoral allocation is concerned, the fund has a fairly high exposure in the FMCG space with GSK Consumer Healthcare alone accounting for about 6.5% of its FMCG composition. With mid-cap FMCG and healthcare sectors doing reasonable well for quite some time now, the fund has already made a neat 20% gain on this stock alone since the time it invested in this stock in February '10.


   As far as healthcare is concerned, while the fund currently has about 8% exposure in this sector, the same has been increased only recently, May '10 onwards, and thus, this sector is yet to reap in gains for this fund. Its stocks under this sector include Cadila Healthcare, Dishman Pharma and Ipca Labs

.
   Given its mid-cap orientation, the fund has more of an opportunistic approach towards investment rather than a long-term holding strategy. It is thus quite proactive in churning its portfolio with most of its current holdings less than a year old. The only exception to this investment strategy is its investment in GMDC, which it has been holding since February '07 and Elecon Engineering, invested in in May '06. Of these, the fund has made a neat kill in GMDC with nearly 175% absolute gains in the last three and a half years of its investment in this stock.

OUR VIEW:

A mid-cap fund with relatively high exposure to select stocks takes Magnum Mid-cap a bit high on the risk scale. Moreover, notwithstanding the fund's decent performance in market rallies, it has failed to cushion its fall in the downturn. While those who had invested into this fund right at its NFO stage in 2005, have made around 146% gains from this scheme till date, these gains appear belittled when compared with CNX Midcap's absolute gains of 199% during this period. Magnum Mid-cap is thus yet to prove its mettle before it can be rated at par with some of the better performing mid-cap schemes of the MF industry.

 


Popular posts from this blog

Tata Mutual Fund

Being a part of the Tata group, the fund has the backing of a very trusted brand name with strong retail connect. While the current CEO has done an excellent job in leveraging the Tata brand name to AMC's advantage, it is ironic that this was just not capitalised on at the start. Incorporated in 1995, Tata Mutual Fund remained an 'also-ran' fund house for around eight years. Till March 2003, it had a little over Rs 1,000 crore in assets and 19 AMCs were ahead of it. But soon after that the equation changed. It was the fastest growing fund house in 2004 and 2005. During these two years, it aggressively launched six equity funds, two debt funds and one MIP. The fund house as of now stands at No. 8 in terms of asset size. This fund house has a lot to offer by way of choice. And, it also has a number of well performing schemes. Tata Pure Equity, Tata Equity PE and Tata Infrastructure are all good funds. It also has quite a few good debt funds. The funds of Tata AMC are known to...

UTI Mutual Fund

Even though only a few of UTI’s funds are great performers, this public sector fund house has many advantages that its rivals do not. It has a huge base of retail equity investors and a vast distribution network. As a business, it looks stronger than ever, especially in the aftermath of credit crunch. UTI is, by a large margin, the most profitable fund company in the country. This is not surprising, since managing equity funds is more profitable than debt. Its conservative approach and stable parentage is likely to make it look more attractive to investors in times to come. UTI’s big problem is the dragging performance that many of its equity funds suffer from. In recent times, the management has made a concerted effort to improve performance. However, these moves have coincided with a disastrous phase in the stock markets and that has made it impossible to judge whether the overhaul will eventually be a success. UTI’s top performers are a few index funds, some hybrid funds and its inf...

Salary planning Article

1. The salary (basic + DA) should be low. The rest should come by way of such allowances on which the employer pays FBT and you don't pay any tax thereon. 2. Interest paid on housing loan is deductible u/s 24 up to Rs 1.5 lakh (Rs 150,000) on self-occupied property and without any limit on a commercial or rented house. 3. The repayment of housing loan from specified sources is also deductible irrespective of whether the house is self-occupied or given on rent within the overall ceiling of Rs 1 lakh of Sec. 80C. 4. Where the accommodation provided to the employee is taken on lease by the employer, the perk value is the actual amount of lease rental or 20 per cent of the salary, whichever is lower. Understandably, if the house belongs to a family member who is at a low or nil tax zone the family benefits. Yes, the maximum benefit accrues when the rent is over 20 per cent of the salary. 5. A chauffeur driven motor car provided by the employer has no perk value. True, the company would...

8 Investing Strategy

The stock market ‘meltdown’ witnessed since the start of 2005 (notwithstanding the recent marginal recovery) has once again brought to the forefront an inherent weakness existent in our markets. This is the fact that FIIs, indisputably and almost entirely, dominate the Indian stock market sentiments and consequently the market movements. In this article, we make an attempt to list down a few points that would aid an investor in mitigating the risks and curtailing the losses during times of volatility as large investors (read FIIs) enter and exit stocks. Read on Manage greed/fear: This is an important point, which every investor must keep in mind owing to its great influencing ability in equity investment decisions. This point simply means that in a bull run - control the greed factor, which could entice you, the investor, to compromise with your investment principles. By this we mean that while an investor could get lured into investing in penny and small-cap stocks owing to their eye-...

Debt Funds - Check The Expiry Date

This time we give you an insight into something that most debt fund investors would be unaware of, the Average Portfolio Maturity. As we all know, debt funds invest in bonds and securities. These instruments mature over a certain period of time, which is called maturity. The maturity is the length of time till the principal amount is returned to the security-holder or bond-holder. A debt fund invests in a number of such instruments and each of these instruments would be having different maturity times. Hence, the fund calculates a weighted average maturity, which would give a fair idea of the fund's maturity period. For example, if a fund owns three bonds of 2-year (Rs 30,000), 3-year (Rs 10,000) and 5-year (Rs 20,000) maturities, its weighted average maturity would be 3.17 years. What is the big deal about average maturity then, you may ask. Well, knowing a fund's average maturity is important because it tells you how sensitive a fund is to the change in interest rates. It is ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now