Bajaj Finserv Large and Midcap Fund NFO: Should you invest in a Large and Midcap Fund

Bajaj Finserv MF has launched a new equity fund, Bajaj Finserv Large and Midcap Fund on 6^th February 2024. The New Fund Offer (NFO) will remain open for subscription till 20^th February 2024. This is the second active equity fund offering by Bajaj Finserv Asset Management Company (AMC) after their flexicap fund. As per SEBI’s mandate for large and midcap funds, the scheme will invest in 35 to 65% in large cap stocks (top 100 stocks by market capitalization) and 35 to 65% in midcap stocks (101^st to 250^th stocks by market capitalization). In this article, we will review Bajaj Finserv Large and Midcap NFO.

Why invest in large and midcap funds?

• Winners rotate across market cap segments (see the chart below). A diversified portfolio of large cap and midcap stocks can produce superior long-term returns, while reducing downside risks in volatile markets. The fund will follow moat investing strategy (Quality-oriented) within the ambit of its INQUBE philosophy to generate performance.
  
  

  

  Source: National Stock Exchange, Advisorkhoj Research; Period: 01.01.2013 to 31.12.2023. Disclaimer: Past performance may or may be sustained in the future



• Large cap indices like Nifty 100 has a heavier tilt towards certain sectors like BFSI, IT, Oil and Gas, FMCG. Large and midcaps provide exposure to sectors where large caps where have no presence e.g. textiles, media and entertainment etc. Further more, Large and midcaps provide more balanced exposure to sectors like Capital goods, Consumer services, Realty and Chemicals, where large cap exposure is low. These sectors can benefit from India’s consumption driven economic growth, rising per capita income, changing global supply chain landscape (e.g. China+1), Government’s policies e.g. import substitution (Make in India), digitization, infrastructure spending, shift from unorganized to organized sectors etc.


• Large caps offer better risk return trade off compared to broad market indices like Nifty 50 and Nifty 500 (see the charts below). You can see that Nifty Large and Midcap 250 TRI gave higher returns than Nifty 50 and Nifty 500 in most years, while standard deviation (volatility) was lower or same in most years.
  
  

  

  Source: Bajaj Finserv, Advisorkhoj Research; Period: 01.01.2013 to 31.12.2023. Disclaimer: Past performance may or may be sustained in the future

Is this a good time to invest in large & midcaps?

The rally in equity markets has driven up the valuations of stocks in different market segment but the large and midcap index is still trading at relatively fair valuations compared to historical average. Current valuations may provide attractive investment opportunities for long term investors.

Source: National Stock Exchange, Advisorkhoj Research; Period: 31.01.2014 to 31.01.2024. Disclaimer: Past performance may or may be sustained in the future

Quality large and midcap stocks can generate superior risk adjusted returns

• Nifty Quality 200 Quality 30 TRI was able to beat Nifty 500 TRI more than 50% of the times in the last 10 years across different market conditions (see the chart below).
  
  

  

  Source: National Stock Exchange, Advisorkhoj Research; Period: 01.01.2013 to 31.12.2023. Disclaimer: Past performance may or may be sustained in the future



• At the same time, standard deviations (volatility) of the Nifty Quality 200 Quality 30 TRI were always lower than Nifty 500 TRI. In other words, Quality produces superior risk adjusted returns.
  
  

  

  Source: Bajaj Finserv, Advisorkhoj Research; Period: 01.01.2013 to 31.12.2023. Disclaimer: Past performance may or may be sustained in the future

About Bajaj Finserv Large and Midcap Fund

The scheme will invest in 40 – 60 large and midcap stocks with wide economic moat advantage. Economic moat refers to a powerful and enduring competitive advantage with the following benefits:-

• Enduring Advantage


• Stability amid fluctuations


• Potential profitability


• Long-term growth


• Quality over size

Stock Selection Process

Bajaj Finserv Investment Philosophy – INQUBE

Why invest in Bajaj Finserv Large and Midcap Fund

Who should invest in Bajaj Finserv Large and Midcap Fund?

• Investors looking for capital appreciation and wealth creation.


• Investors having a 5 year plus investment horizon in this scheme.


• This fund can be suitable for new or first time investors


• Investors with very high risk appetite.


• Investors can invest in this scheme either through lump sum or SIP depending on your investment needs.

Investors should consult with their financial advisors or mutual fund distributors if Bajaj Finserv Large and Midcap Fund will be suitable for their investment needs.