LIC MF Multicap Fund: Upturn in performance makes this fund a compelling choice

Current market context

The India Growth Story is intact and poised for the next phase of growth in the coming years. India is in a macro sweet spot with strong GDP growth outlook, narrowing fiscal deficit and stable currency. The stock market is trading at all time high. Global markets, especially the US market, have also supported the momentum in Indian equities. The rally has been broad based with small and midcaps outperforming large cap stocks. LIC MF Multicap Fund, which invests in all 3 market cap segments i.e. large cap, midcap and small cap, has given 50% return in the last 1 year and is among the Top 5 multicap funds. The fund has 34.98% CAGR return since inception (as on 23^rd August 2024). LIC MF Multicap Fund’s upturn in performance (relative to benchmark and peers) and investment strategy suggests strong wealth creation potential of the fund for long term investors.

Why invest in Multicap for long term wealth creation?

• Multicap funds provide exposure to a larger number of industry sectors compared to large cap funds. There are several sectors where large caps do not have any presence. Some of these sectors may have high growth potential in domestic consumption driven economy like India.


• Multicap funds provide exposure to a much larger universe of stocks compared to large cap or even midcap funds.


• Midcaps and small caps have higher earnings growth and valuation rerating potential compared to large caps. The midcap and small cap allocations of Multicap funds have the potential to create higher alphas compared to large cap funds.


• The large cap component of multicap funds can reduce downside risks and provide stability in volatile markets.


• The long term structural India Growth Story is not about any one market cap segment. It spans across all three market cap segments and several industry sectors. Multicap funds are well positioned to capture the long term growth opportunities in India’s journey to Viksit Bharat.

Performance of LIC MF Multicap Fund

The chart below shows the growth of Rs 10,000 investment in LIC MF Multicap Fund versus Nifty 50 TRI. You can see that the fund outperformed the leading market index by a big margin.

Source: Advisorkhoj Research, as on 23^rd August 2024.

Rolling returns of LIC MF Multicap Fund versus benchmark

The chart below shows the monthly rolling returns of LIC MF Multicap Funds versus its benchmark index Nifty Multicap 50:25:25 TRI since the inception of the fund. You can see that the average monthly return of LIC MF Multicap Fund is higher than the benchmark index. You can also see the percentage instances of negative returns given by LIC MF Multicap Fund was less than instances of negative returns of the benchmark market index. You can see that in recent months, outperformance of the fund has widened.

Source: Advisorkhoj Rolling Returns Calculator, as on 23^rd August 2024.

Rolling returns of LIC MF Multicap Fund versus peer

The chart below shows the monthly rolling returns of LIC MF Multicap Funds versus the Multicap Funds category average since the inception of the fund. You can see that the percentage instances of negative returns given by LIC MF Multicap Fund was significantly less than instances of negative returns of the multicap category average. Performance consistency in different market conditions should be taken into consideration by investors when selecting equity funds for their portfolios. Performance consistency provides better investment experience and can prevent investors from making wrong investment decisions.

Source: Advisorkhoj Rolling Returns Calculator, as on 23^rd August 2024.

Performance of LIC MF Multicap Fund in down markets

In the table below, we have show how LIC MF Multicap Fund performed versus its benchmark market index Nifty Multicap 50:25:25 TRI in months during which the broader market was down since the inception of the fund. You can see that the fund was able to limit downside risks for investors in bigger corrections. Historical mutual fund performance data suggests that funds which can limit downside risks for investors have the potential of giving superior risk adjusted returns over long investment horizons covering multiple market cycles.

Source: Advisorkhoj Research, as on 31^st July 2024.

Market capture ratios

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 Ratiotells 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 LIC MF Multicap Fund over the last 1 year.

The Up Market Capture Ratio of LIC MF Multicap Fund over last 10 years was 109% which implies that if the benchmark index went up by 1% in a month, then the scheme’s Net Asset Value (NAV) went up by 1.09%. The Down Market Capture Ratio of the fund was 82% which implies that if the benchmark index went down by 1% in a month, then the scheme’s Net Asset Value (NAV) went down by 0.82%. The market capture ratios of LIC MF Multicap Fund are a clear indication of the potential of the fund to give superior risk adjusted returns of the fund.

Multicap Strategy of LIC MF Multicap Fund

Stock selection

The fund manager follows a blended approach using qualitative and quantitative analysis:-

• Qualitative: Emphasis is put on the company’s products, services, management, competitors, etc. The fund manager evaluates impact of prevailing and evolving macro on above factors on the sector and company


• Quantitative: The fund manager concentrates on the income statements, balance sheets, and cash flows, and analyzes the relationship between price and intrinsic value.

The qualitative approach helps in understanding the business dynamics and assigning the better multiple and quantitative approach helps in forecasting financials. Combination of these two approaches helps in determining optimal valuations.

Current portfolio positioning

LIC MF Multicap Fund has higher allocations to small cap compared to multicap category average. The higher small cap allocations of the fund create the potential of higher capital appreciation or alpha creation.

Source: LIC MF Factsheet, Advisorkhoj Research as on 31^st July 2024

Source: LIC MF Factsheet, as on 31^st July 2024

Low overlap with other LIC MF diversified equity funds

LIC MF Multicap Fund (marked in red) has relatively low overlap with other diversified equity funds from LIC MF stable (see the table below). You can also see that other diversified equity schemes also have relatively low overlap with each other. You can build your core equity portfolio with LIC MF Multicap Fund and other diversified funds from LIC MF as per your risk appetite.

Source: Advisorkhoj Research, as on 31^st July 2024

Who should invest LIC MF Multicap Fund?

• Investors with long term investment horizon i.e. 5 years or more


• Investors with a high-risk appetite who can tolerate the short term volatility associated with equity investments


• They are suitable for investors who want to invest from their monthly savings through SIP for their long term financial goals


• You can invest either in lump sum or SIP depending on your financial situation and investment needs


• If you have lump sum funds but are worried about volatility, then you can invest your lump sum funds in LIC MF Liquid Fund and transfer systematically to LIC MF Multicap Fund through 3 – 6 month STP

You should consult with your financial advisor or mutual fund distributor, if LIC MF Multicap Fund is suitable for your investment needs.