Canara Robeco Flexicap Fund: Good fund for volatile markets

Market Context

The market has rallied after Israel and Iran agreed to cessation of hostilities. FII flows continue to be robust despite geopolitical and global trade uncertainties. Valuations have moderated across market capitalization segments after the sharp correction from September to March. However, there are concerns about the US economy slowing down (as per US Fed's latest FOMC meeting's statement) and the fluid situation in ongoing trade talks between United States and its trading partners. Indian equities have shown strong resilience amidst global trade uncertainties and Moody's downgrade of US Sovereign rating.

Markets resilience stems from confidence in India's domestic growth dynamics, stable macro-economic factors and accommodative monetary policy stance of the RBI. Markets are however, unpredictable; they can be up one day and down another day. But your financial goals do not change. You should remain disciplined and continue to invest for your financial goals. In current market conditions, a flexi cap strategy may be suitable for investors looking for long term wealth creation and relative stability in their portfolios. In this article, we will review the Canara Robeco Flexicap Fund.

How is a Flexicap strategy important in a diversified portfolio?

• No market cap bias is the best strategy to build long term wealth: Diversification captures opportunities across market capitalisation. Diversified index [market cap agnostic] like Nifty 500 has historically outperformed large caps all time periods. (See graphic below)
  
  

  

  Source: Advisorkhoj Research. Period considered – 15 years: 1^st Jan 10 to 30^th Jun '25. Returns greater than 1 year period are in CAGR. The above graph shows the performance as an average of various periods (3,5,7 and 10 years) rolling return.



• Diversification reduces the volatility over long term: Diversification renders flexibility to invest across sectors/themes and may perform well in different market conditions with relatively lower risk. Diversification provides better risk adjusted return opportunity.
  
  

  

  Source: Canara Robeco MF. Period considered is from 30^th Apr '15 – 30^th Apr '25 Average of 1 year rolling return for sectoral indices under BSE is taken for comparison. Diversified Index – BSE 500 TRI. Source: ICRA MFI Explorer. CAGR Returns.

Why invest in Flexicap now?

• India is targeting a narrower fiscal deficit of 4.4% in FY 2026, with reduced Government borrowing. Inflation is cooling. Tax benefits announced in 2025 Union Budget (income up to Rs 12.75 lakhs except from income tax), rural consumption demand recovery and above normal monsoon forecast, front loading of Government spending in FY 2026 can lead to higher demand recovery.


• Lower crude prices and weakening dollar might provide a good base for the market recovery (see the graphic below). Repo rate cuts by the RBI are likely aimed at providing a boost to market recovery.


• The sharp correction in the market has brought valuations to reasonable levels across all market cap segments (see the graphic below).
  
  

  

  Source: NSE, Advisorkhoj Research, as on 31^st May 2025



• A Flexicap strategy can be suitable in the current market conditions both from a short term and long-term perspective because a Flexicap fund manager has the flexibility to manage market cap allocation depending on his / her outlook. In times of uncertainty or volatility, the fund manager can increase large cap allocations (large caps tend to be less volatile, see the drawdown chart below) and increase allocations to mid / small caps in different phases of market recovery.


• Ideal for retail investors: Diversification across different market cap segments can reduce unsystematic risks and generate more consistent returns. Flexicap Funds are ideal for investors who are not able to decide how much allocations they should have towards each market cap segments and want the fund managers to decide on market cap allocation


• Tax efficiency: Flexicap funds are also tax efficient. If an individual investor rebalanced between different investments (large, mid or small cap) then such rebalancing would attract tax liabilities for the investor. Flexicap funds are tax efficient in the sense that any rebalancing or change in market cap allocations of the fund does not attract any tax liabilities in the hands of the investor.

Canara Robeco Flexicap Fund Regular Growth

Canara Robeco Flexi Cap Fund launched in September 2003 and since then aimed to provide an investment opportunity in the Indian companies with sustainable business models to gain from the Indian Growth Story. These companies are selected based on "Top Down" as well as "Bottom Up" research-based approach. The fund is managed by Mr. Shridatta Bhandwaldar and Mr. Pranav Gokhale.

Wealth creation with Canara Robeco Flexicap Fund

If you had invested Rs 1 lakh in the Canara Robeco Flexicap fund as a lumpsum at its inception, it would have grown to a corpus of Rs 33.27 lakhs giving a CAGR of 17.51%

A monthly SIP of Rs 10K in the fund since it's would have become Rs 1.75 crores as on 31st May 2025 giving an XIRR of 15.41%. (See chart below)

Source: Advisorkhoj Research as on 31^st May 2025

Rolling Returns

The chart below shows the 5 year rolling returns of the fund vs the Flexicap category over the last 15 years (as on 31st May 2025). You can see that the fund has outperformed the category in most instances. The average 5 year return of the fund over this period were 13.96% while the category average was 11.69%. During this time the fund's 5 year CAGR returns were above 12% was for 75% instances (whereas the Flexicap category could achieve the above 20% returns only in 53% of the instances (see the graphic below).

Source: Advisorkhoj Research as on 30^th June 2025

Limited Downside Risks

The chart below shows the drawdowns of Canara Robeco Flexicap Fund versus the broad market index, Nifty 500 TRI over the last 3 years. You can see that the fund was able to limit downside risks for investors in volatile market conditions. The maximum drawdown of the scheme was 18% versus 19% for the broad market index, Nifty 500 TRI.

Superior risk adjusted returns

Market capture ratio is a measure of the performance of a mutual fund scheme relative to its benchmark index in rising and falling markets. Up Market Capture Ratio tells us how much percentage of the market's upside was captured by the fund, while Down Market Capture Ratio tells us how much percentage of the market's downside was arrested by the fund. Up-Market Capture Ratio and Down-Market Capture ratio can give us a sense of risk adjusted returns. We looked at the market capture ratios of Canara Robeco Flexicap fund over the last 1 year.

The Up Market Capture Ratio of Canara Robeco Flexicap fund was 104% which implies that if the broad market index went up by 1% in a month, then the scheme's Net Asset Value (NAV) went up by 1.04%. The Down-Market Capture Ratio of the fund was 95% which implies that if the broad market index went down by 1% in a month, then the scheme's Net Asset Value (NAV) went down by 0.95% only. In other words, Canara Robeco Flexicap Fund not only beat the broad market index when market was trending upwards, it was able to provide downside risk limitation to investors in market corrections.

Investment Process

Canara Robeco Flexicap follows a predominantly bottom-up investment approach with a focus on fundamentally sound companies which aim to deliver capital appreciation over the long-term. The fund also takes Top-down approach to identify sectoral themes based on the available opportunities. The fund is a market agnostic fund and takes exposure across large, mid and small cap companies having high conviction ideas. The fund provides a blend of 'Growth' and 'Value' style of investing. The fund follows GARP (Growth at Reasonable Price) style of investing.

A three-pronged process of ideation, screening and ultimately designing the final portfolio is followed to identify and invest in quality stocks. (See graphic below)

Portfolio Construct

Source: Fund Factsheet as on 31^st May 2025

Why Canara Robeco Flexi Cap Fund?

• The fund aims to provide an investment opportunity in the "best in class" Indian companies with sustainable business models to gain for the India Growth Story. These companies are selected based on "Top-Down" as well as "Bottom-Up" research-based approach


• Focused on large caps with few high conviction mid-cap and small cap ideas– Large-cap companies aim to render stability and liquidity to the portfolio and select mid and small cap companies yield higher returns in the long term as the companies grow in size and in market capitalization


• Investment Style– Fund follows GARP (Growth at Reasonable Price) style of investing

Who should invest in the Canara Robeco Flexi Cap fund?

1. The fund can form the 'CORE' part of an investor's equity portfolio.


2. Investors with long term investment horizon i.e., 5-7 years or more.


3. Investors with very high-risk appetite who can tolerate the short-term volatility associated with equity investments.


4. They are suitable for investors who want to invest from their monthly savings through SIP for their long-term financial goals like children's higher education, marriage, retirement planning, wealth creation etc.


5. Investors who wish to avoid the complexities of determining allocation among large, mid, and small-cap stocks independently.

Consult a mutual fund distributor or your financial advisor to understand if the Canara Robeco Flexicap Fund is suited to your investor profile.