Motilal Oswal Large Cap Fund: NFO Review

Investors eyeing a differentiated large-cap strategy for their equity portfolios can consider an allocation to the new fund offer (NFO) of Motilal Oswal Large Cap Fund.

Given that large-cap valuations are reasonable, investors with a time frame upwards of five years can consider lumpsum investments, while first-time investors can consider an allocation using systematic investment plans.

The NFO is currently open and closes on January 31. The minimum investment amount is ₹500 and in multiples of ₹1 thereafter. The fund will be managed by Atul Mehra and will be benchmarked to the Nifty 100 TRI.

The performance of actively managed large-cap funds has bounced back in the last one year with several such schemes beating their benchmarks, as the equity rally got broader.
Wealth managers have been recommending incremental allocation to large-cap schemes given that mid-cap and small-cap stocks have run up sharply with valuations there being stretched. Over the last one year, large-caps represented by the Nifty50 are up 20.6%, the Nifty Midcap 150 is up 51.5%, and the Nifty Smallcap 250 has gained 57.9%.Motilal Oswal aims to differentiate its scheme by having a concentrated equal-weight portfolio of 30 stocks, higher active share and a high conviction portfolio. “The scheme will have a concentrated and differentiated portfolio, and it will not mimic the index. This strategy could help generate alpha over the long term,” said Vineet Nanda, founder of Sift Capital. Nanda believes the fund will be a good fit for investors eyeing a differentiated large-cap play in their portfolios. The large-cap fund will maintain its active share between 60-80% compared to the 40% average of its peers in the industry.The large-cap universe has an average of 58 stocks in the portfolio while here the fund manager will restrict them to 30.

“Given that valuations are reasonable in the large-cap space, investors eyeing an actively managed large-cap fund can consider an allocation here,” said Nirav Karkera, head of research at Fisdom. Karkera believes depending on their cash flows investors could use a mix of lump sum and SIP approaches to make allocations to the scheme.