SBI Magnum Midcap Fund: Focusing on High Conviction Mid-cap Stocks

Past performance is not an indicator of future returns
Data as on January 03, 2022
(Source: ACE MF)

SBI Magnum Midcap Fund was once a top-performing midcap fund that went through a bad phase and recorded a prolonged underperformance. However, it has shown a significant recovery in performance in the last couple of years. In the last 2-year and 3-year time periods, SBI Magnum Midcap Fund has outperformed the benchmark Nifty Midcap 150 - TRI by a margin of around 1.5-3 percentage points and also outpaced most of its peers. Over the longer time period of 5 years and 7 years, the fund has managed to generate returns nearly at par with the category average.

The volatility registered by the fund is slightly higher than 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 (0.28) is currently the best in the category and far ahead of the benchmark.

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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.

SBI Magnum Midcap 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 stock holding 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; accordingly, it has recorded a low turnover rate of 10-30% in recent months.

SBI Magnum Midcap Fund's portfolio is usually diversified across 60 to 65 stocks spread across sectors. As of November 30, 2022, the fund held 60 stocks in its portfolio, with the top 10 stocks accounting for around 37.9% of its total assets. Page Industries, Tube Investments of India, CRISIL, Sheela Foam, and Schaeffler India are the stocks that currently form part of the fund's top holdings. Some of these stocks have been part of the fund's portfolio for over 2 years now.

The fund has benefited the most from its holdings in Cholamandalam Investment & Finance Co., Carborundum Universal, Schaeffler India, Sheela Foam, Page Industries, Happiest Minds Technologies, and Thermax that contributed over 30% to its absolute gains in the last two years.

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, Financial, and Consumer Durables sectors that collectively form 42.4% of its assets. It also holds substantial exposure to Textile, Auto Ancillaries, Cement, Construction, and Consumption having allocation in the range of 4-7%.

Suitability

SBI Magnum Midcap Fund holds a long-term track record of nearly 18 years, during which it has witnessed bouts of outperformance as well as underperformance. The fund stands out for its ability to stem losses during the bearish phase, wherein it has managed to outpace the benchmark as well as many of its peers. However, SBI Magnum Midcap Fund is not a great bull market performer and may underperform the benchmark and many of its peers. Despite facing bouts of underperformance, SBI Magnum Midcap Fund has managed to perform well over complete market cycles and reward investors for their patience.

The fund has shown strong growth in performance in the last couple of years to recover past losses and find a place among the top performers in the Mid Cap Fund category. Despite facing bouts of underperformance, SBI Magnum Midcap Fund has managed to perform well over complete market cycles and reward investors for their patience.

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

​Warm Regards,
Divya Grover
Research Analyst

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.

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