SBI Magnum Midcap Fund: Focusing on Diversification to Manage Risks

SBI Magnum Midcap Fund is one of the popular schemes in the Mid Cap Mutual Fund category that has made a significant recovery over the last couple of years after experiencing an extended bout of performance pressure. It now fares reasonably on risk-reward parameters compared to its peers and the benchmark index.

Launched in March 2005, SBI Magnum Midcap Fund aims to invest in a well-diversified basket of stocks of mid-cap companies. With a track record of nearly 19 years, SBI Magnum Midcap Fund has generated returns at a CAGR of about 17% since its inception. However, the journey of the fund has not been smooth. Since its inception, the fund has been through many ups and downs, right from being a top category performer to a category laggard. Notably, the fund showcased robust performance between CY 2011 and 2016, which helped it find a place among the category toppers.

However, SBI Magnum Midcap Fund witnessed a prolonged dull phase between 2016 and 2019 wherein it trailed the benchmark and many of its peers by a noticeable margin. Nonetheless, the fund managed to limit the downside during the 2020 market crash to stand strong among its peers. Moreover, it also stood among the above average-performers in the category during the ensuing bull phase, thereby witnessing a complete turnaround.

This highlights SBI Magnum Midcap Fund's ability to reward investors reasonably well over longer time frames. The fund's corpus has nearly doubled in the last one year to Rs 15,458 crore (as of December 2023), making it the sixth largest scheme in the Mid Cap Fund category.

In the last 5 years, SBI Magnum Midcap Fund has grown at a CAGR of 24%, compared to a growth of 25% in its benchmark Nifty Midcap 150 - TRI. An investment of Rs 10,000 in the fund five years back would now be worth Rs 29,382, while a simultaneous investment in its benchmark would now be valued at Rs 30,573.

SBI Magnum Midcap Fund was once a top-performing midcap fund that went through a bad phase and recorded a prolonged underperformance from CY 2016 to CY 2019. However, it showed a significant recovery in performance between 2020 and 2022.

The fund currently stands among the above-average performers in the category over medium-term time frames. In the last 3-year period, SBI Magnum Midcap Fund has outperformed the benchmark Nifty Midcap 150 - TRI by a margin of around 1-2 percentage points and also outpaced many of its peers. Even over the longer 5-year period, the fund has outpaced the benchmark and the category average by a decent margin. Although the fund has significantly trailed the benchmark and several of its peers in the last one year, it holds the potential to bounce back with strong gains.

The volatility registered by the fund is nearly in line with the category average, though lower than the benchmark. SBI Magnum Midcap Fund has rewarded investors with noteworthy risk-adjusted returns. The fund's Sharpe ratio (0.40) is currently nearly in line with the category average and slightly ahead of the benchmark.

[Read: Rally in Mid Cap and Small Cap Funds: Should You Buy More or Sell Now?]

What is the investment strategy of SBI Magnum Midcap Fund?

SBI Magnum Midcap Fund is a mid-cap fund that is mandated to invest at least 65% of its assets in equity and equity-related instruments of mid-sized companies. SEBI defines mid-cap stocks as companies ranking 101st to 250th in terms of full market capitalisation. The fund also has significant exposure to stocks in the small-cap segment along with minor allocation in stocks of large-sized companies.

SBI Magnum Midcap Fund follows a blend of growth and value styles of investing. It follows a 'bottom-up' approach to stock-picking in order to choose high-growth companies across sectors. The fund aims to focus on fundamentally sound companies that have solid management and sound business models, and those that have the potential to grow and become leaders of tomorrow.

The fund manager aims to create a diversified portfolio and holds each of the stock holdings with high conviction. It usually stays invested in around 60-65 stocks at any point in time and holds them with a long-term view. The fund follows a buy-and-hold approach, and accordingly, it has recorded a low turnover rate of 10-15% in recent months.

SBI Magnum Midcap Fund's portfolio is usually diversified across 60 to 70 stocks spread across sectors. As of December 31, 2023, the fund held 71 stocks in its portfolio, with the top 10 stocks accounting for around 30.3% of its total assets. CRISIL, Sundaram Finance, Schaeffler India, Tube Investments of India, and Torrent Power are the stocks that currently form part of the fund's top holdings. Thermax, Coromandel International, Sheela Foam, The Indian Hotels Company, and Page Industries are among the other core holdings in the fund's portfolio having an allocation of around 3-4% in each. Some of these stocks have been part of the fund's portfolio for over 2 years now.

In the last two years, the fund has benefited the most from its holdings in Tube Investments of India, Cholamandalam Investment & Finance Co., TVS Motor Company, The Indian Hotels Company, Schaeffler India, Thermax, The Phoenix Mills that together contributed over 20% to its absolute gains in the last two years. SBI Magnum Midcap Fund has also gained from its exposure to Gokaldas Exports, Coromandel International, Bharat Forge, ABB India, ZF Commercial Vehicle Control Systems India, Mahindra & Mahindra Financial Services, and The Federal Bank, among many others.

SBI Magnum Midcap Fund's portfolio is well-diversified across Cyclical, Defensive, and Sensitive sectors. The fund holds higher exposure to stocks in the Engineering and Finance stocks that collectively form around 28.6% of its assets. It also holds substantial exposure to Auto Ancillaries, Textiles, Consumer Durables, Consumption, Construction, and Pharma having allocation in the range of 4-7%. The top 10 sectors currently account for 70.6% of its assets.

Is SBI Magnum Midcap Fund suitable for my investment goals and risk tolerance?

While SBI Magnum Midcap Fund has occasionally registered extended bouts of sub-par growth, it has displayed its ability to recover past losses and find a place among the top performers in the Mid Cap Fund category. The fund has a history of doing well over complete market cycles, which gives confidence about the fund's ability to reward investors well over longer time frames.

SBI Magnum Midcap Fund maintains a well-diversified portfolio of around 60-70 stocks spread across sectors. The fund manager, Ms Sohini Andani, has been managing the scheme for over 13 years now. She avoids taking aggressive bets on any particular stock or sector and exposing investors to unnecessary concentration risk. Moreover, she focuses on picking fundamentally sound stocks and holds them with a long-term view, which can prove to be rewarding for the investors in the scheme.

SBI Magnum Midcap Fund is suitable for aggressive investors looking to benefit from the market leaders of tomorrow with an investment horizon of at least 5 to 7 years.

Watch this video to find out the list of the best Mid Cap Funds for 2024:

Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

We are on Telegram! Join thousands of like-minded investors and our editors right now.

We are on Whatsapp! Join our exclusive Whatsapp channel.

DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.
Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

Terms and condition on which its offer research report

For the terms and condition for research report click here.

Details of associates

1. Money Simplified Services Private Limited;

2. PersonalFN Insurance Services India Private Limited;

3. Equitymaster Agora Research Private Limited;

4. Common Sense Living Private Limited;

5. Quantum Advisors Private Limited;

6. Quantum Asset Management Company Private Limited;

7. HelpYourNGO.com India Private Limited;

8. HelpYourNGO Foundation;

9. Natural Streets for Performing Arts Foundation;

10. Primary Real Estate Advisors Private Limited;

11. HYNGO India Private Limited;

12. Suresh Lulla;

13. I V Subramaniam.

1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

1. The Research Analyst has not served as an officer, director or employee of the subject Company.

2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Click here to read PersonalFN's Mutual Fund Rating Methodology

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021

Email:info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013