The Indian rupee is under immense pressure, this may signal economic disparity.

With the rupee hitting its lowest value, many mutual fund investors are enquiring about Parag Parikh Long Term Equity Fund.

Why?

This long term equity fund has the flexibility to invest in Indian and foreign companies, irrespective of market capitalisation and sectors.

Let’s have a look at this fund in detail.

parag parikh long term equity fund analysis

parag parikh long term equity fund analysis

Parag Parikh Long-Term Equity Fund Analysis

There are a very few Indian mutual funds that actively track and invest in US equities.

Parag Parikh Long Term Equity Fund is one of the few Indian mutual fund schemes which invests in Indian and foreign stocks.

This is a multi-cap equity oriented mutual fund which also invests in international stocks.

Also Read: Aditya Birla Sun Life Tax Relief 96 Fund Review 2018

Details

 Before you start investing in any mutual fund scheme, you should look into the basic features:

Key information

Launch Date 24 May 2013
NAV (18 June 2018) ₹25.6
Plan Type Direct
Rating by Groww 4 Star
AUM (Fund Size) ₹1,107 Cr
Riskometer Very High
Minimum SIP ₹1,000
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark NIFTY 500 since its launch.
Age of the fund 5 years old
Expense Ratio 1.50%
Exit Load If redeemed bet. 0 Days to 365 Days; Exit Load is 2%; If redeemed bet. 365 Days to 730 Days; Exit Load is 1%;
Type  Open Ended

Performance

This fund has given a very good return since its launch and is less risky in the multi cap category, due to its additional diversification.

Returns per annum

Duration Returns
1 year 13.8%
3 years 15.7%
5 years 20.4%
Since launch 19.3%

As seen from past data, this fund has given a high return over the years and has consistently outperformed its benchmark.

The ideal tenure of investment is more than 5 years, if you want potential returns from this fund.

Objective

Parag Parikh Long Term Equity Fund is a diversified equity scheme with the investment objective of generating long-term capital growth from an actively managed portfolio, primarily of equity and equity-related securities.

This fund’s allocation is guided by good opportunities to diversify.

They get to diversify portfolio holdings by investing up to 35% of the fund’s assets in foreign stocks.

In order to retain its status as an Indian equity mutual fund, this scheme invests at least 65% in domestic stocks.

Being an equity mutual fund scheme, this fund is seemingly volatile, as compared to debt funds.

Also Read: When is the right time to invest in lump sum and SIP?

Holdings

This fund’s investment universe is not restricted by any self-imposed limitations in terms of sector, market capitalization, geography, etc.

However, an average of 65% of its corpus will be invested in listed Indian equities, in order to benefit from the favourable Capital Gains tax,accorded to such schemes.

Top 5 international holdings

Name of the Instrument Industry % to NAV
Alphabet Inc. Prev (Google) Software 10.4%
Suzuki Motor Corp (ADR) Auto 5.0%
Facebook Inc. Software 5.2%
3M CO Industrial Conglomerates 2.2%
International Business Machines Corp (IBM) IT Consulting & Other Services 1.9%

Top 5 domestic holdings 

Name of the Instrument Industry % to NAV
HDFC Bank Ltd Banks 7.0%
Bajaj Holdings & Investment Ltd Finance 6.3%
Balkrishna Industries Ltd Auto Ancillaries 4.3%
Persistent Systems Ltd Software 5.2%
Zydus Wellness Ltd Consumer Non Durables 4.7%

Top 5 equity sector allocation

Sector allocation Current % NAV
IT Service 26.1%
Automobile 12.67%
Financial service 19.46%
Consumer Goods 7.9%
Pharma 4.49%

This has resulted in the fund having a higher exposure to domestically oriented sectors with sectors such as IT, auto ancillaries and financial services accounting for nearly 60% of the total portfolio.

Comparison

 Let us compare this fund with the other top 3 contenders in the multi-cap category.

Other top Funds Returns over the years Min SIP Investment Fund Size (Cr) Rating
1Y  3Y 5Y
Motilal Oswal MOSt Focused Multicap 35 Fund 6.9% 17.6% NA ₹ 1,000 ₹ 13,061 3
SBI Magnum Multi Cap Fund 4.3% 15.2% 23.3% ₹ 500 ₹ 4,086 4
Aditya Birla Sun Life Equity Fund 3.3%  16.2% 24.4% ₹ 500 ₹ 9,351 4

 

As seen from the table, Parag Parikh Long Term Equity Fund is easily one of the best performing multi-cap funds in the market today and its AUM is also less as compared to its peers.

With consistently high returns, this fund has managed to outperform nearly all other funds in its category in the last 1 year.

Fund Managers

This fund is managed by 3 fund managers.

They both have immense experience in the Indian financial sector.

The domestic portion of the scheme is managed by Mr. Rajeev Thakkar, while Raunak Onkar manages the foreign investment component. Raj Mehta is responsible for the ‘fixed income’ investment component.

1.Raj Mehta: Jan 2016 – Present

Education

Mr. Mehta is a B.Com and M.Com from Mumbai University, CA and CFA Level III Pass.

Experience

Prior to joining PPFAS AMC, as a Research Analyst he was associated with the AMC as an intern since 2012.He has collectively over 3 years of experience in investment research.

 Funds Managed:

  • Parag Parikh Long Term Equity Fund – Regular Plan – since Jan 2016
  • Parag Parikh Liquid Fund – Regular Plan – since May 2018

2 . Rajeev Thakkar: May 2013 – Present

Education

Mr.Thakkar is a Chartered Accountant, Cost Accountant, CFA, and CFP.

Experience

He has been associated with PPFAS AMC since 2013. 

Funds Managed

  • Parag Parikh Long Term Equity Fund – Regular Plan – since May 2013

 3.Raunak Onkar since May 2013

Education

Mr.Onkar is an MMS (Finance) from the University of Mumbai.

Experience

His has been associated with PPFAS Limited for quite a few years.

Funds Managed

  • Parag Parikh Long Term Equity Fund – Regular Plan – since May 2013

About AMC

 PPFAS Mutual Fund has assets under management (AUM) of about ₹905 crore at the end of 2017.

Challenging the status quo of the Indian mutual fund industry, PPFAS Mutual Fund, promoted by Parag Parikh Financial Advisory Services, held its first unit holders meet in Mumbai on 22 November 2014.

This fund house believes that investing should not be a complicated process.

Hence, they strive for simplicity in their scheme design.

While investing involves individuals, they accord more importance to the investing process than to personalities.

According to the fund house, it does not launch new schemes to take advantage of the bull run and wants to be transparent and accountable to its unitholders.

What’s the hype?

The domestic equity market looks less favorable amid elevated valuations, a potential slowdown in economic growth and upcoming general elections.

Investors have been bullish on Indian stocks since March 2014 and the market has nearly doubled since then, returning more than twice that of global equities.

India’s beaming economic expansion that now faces tests from higher oil prices and a tumbling rupee has accompanied the stellar run for equities, confounding non-believers in recent years.

In such an uncertain scenario in the Indian market, Parag Parikh Long Term Equity Fund is providing different value proposition for mutual fund investors.

Parag Parikh Long Term Equity Value Fund has cut its net investments in Indian stocks to 46.76% from 57.22% a year ago.

Also, this fund reduces the risk of their investors losing, due to sharp currency appreciation of the Indian rupee, by hedging approximately 80% foreign exposure through currency contracts.

When it comes to foreign stocks, this fund prefers countries where stock markets are well-developed and good governance is in place.

All these factors lead to the hype of this fund in the Indian mutual fund industry.

Also Read: Can You Invest With Rs. 500?

Why should you invest in this fund?

Here are the few important reasons, why you should invest in this fund.

1.Reduces risk

Most equity mutual fund schemes help investors diversify across industries within the same country.

However, investors could still be affected if there are negative events throughout the country (such as war, drought, political turmoil etc.).

Investing across countries helps to reduce this risk.

2.Winners keep rotating

Different markets perform well at different times and it is virtually impossible to predict who will be the next winner.

Also, there will be times when the Indian stock market may underperform.

By diversifying abroad, we reduce the risk of our investors losing out when this happens.

3.Reducing portfolio volatility

Stock markets do not always move at the same pace or in the same direction.Hence, investing across countries helps to reduce the volatility of the portfolio.

Lower fluctuation in the Net Asset Value (NAV) equals to greater peace of mind.

4.Wider choice

There are several world-class companies which do not have listed Indian subsidiaries. Also, there are innovative companies making certain products/services for which there are no Indian substitutes.

When this fund invests abroad, their investors get a chance to benefit from the performance of such global leaders

5.Valuation

Sometimes, the Indian subsidiary of a multinational company may be very highly valued, and hence not investment-worthy.

However, its parent company may be available at a much more reasonable valuation. This fund can take advantage of such situations.

Parag Parikh Long Term Equity Fund employs the same time-tested principles of value investing while choosing both, Indian and foreign stocks.

What are the risks? 

The best thing about investing in mutual funds is that it provides you a wide scope of investment options, depending on your risk appetite.

1.Market Risk

This reflects the correlation between the stock market volatility and the mutual fund’s performance.

The performance of an equity oriented fund will be affected with changes in the stock market, and this type of risk is unavoidable for an equity oriented fund.

2.Liquidity Risk

If a particular scheme is not performing well, the fund house may face difficulties in finding buyers.

3.Credit Risk

This reflects the risk that the company in which the mutual fund has invested the corpus will default on the repayment, thereby affecting the investor’s returns.

4.Country Risk

Investments are always subject to political changes or instability in the country where the investment was issued.

What’s more? 

PPFAS Mutual Fund house, which offered only one mutual fund scheme –Parag Parikh Long Term Equity Fund till recently, gives you the chance to invest directly in these big international companies via this mutual fund scheme.

PPFAS Mutual Fund launched a new mutual fund scheme on 9th May 2018 – Parag Parikh Liquid Fund-Direct Plan

Objective

Parag Parikh Liquid Fund is an open-ended scheme whose primary investment objective is to deliver reasonable (non-guaranteed) market-related returns with lower risk and high liquidity through judicious investments in money market and debt instruments.

However, there is no assurance that the investment objective of the scheme will be realized and the scheme, like all other schemes does not assure or guarantee returns.

Fund Category

 Parag Parikh Liquid Fund-Direct Plan is a debt oriented mutual fund scheme.

Since this is a liquid fund, it can easily be converted in to cash, that too within one or two working days (usually).

Liquid funds invest in highly liquid money market securities like Commercial Paper(CPs), Treasury Bills and Certificate of Deposit(CDs).They invest in instruments with a maturity period of up to 91 days.

Among all debt funds, liquid funds provide the most stable returns.

Liquid funds are best-suited for investors that have a surplus amount lying idle in savings bank account and want to get better returns.

Hence, Parag Parikh Liquid Fund-Direct Plan is a suitable option for investors who are seeking a virtually zero-risk savings solution for a short period (usually, less than a year).

Key reason for investing in this fund:

1.It is a credible alternative to bank fixed deposits, because it enables you to invest money for a short period.

2.It is a good option for those seeking a highly liquid option, with no exit load.

3.Choice for STP: STP stands for Systematic Transfer Plan. You could use the proceeds from Parag Parikh Liquid Fund to systematically undertake transfers or Switches into Parag Parikh Long Term Equity Fund.

Hence, Parag Parikh Liquid Fund-Direct Plan NFO is a suitable option for investors who are seeking a virtually zero-risk saving solution for a short period (usually, less than a year).

Parag Parikh Funds at a Glance
Fund Name 1Y 3Y 5Y Expense Ratio Turnover Ratio Category Risk
Parag Parikh Long Term Equity Fund - Direct - Growth 3.27% 15.72% 18.3% 1.41% 233.22% Equity
(Multi Cap)
Moderately High
Parag Parikh Liquid Fund - Direct - Growth NA NA NA 0.15% NA Debt
(Liquid)
Low

Conclusion

I am sure you have thought about investing in Apple, Amazon, Microsoft, Google or Facebook, despite the fact that these companies are not listed in the Indian stock exchange(s).

Indian investors can still invest in them directly through this mutual fund scheme.

Being a multi-cap fund, Parag Parikh Long Term Equity Fund offers the fund manager the freedom to invest across large-cap, mid-cap and small-cap stocks, that too across different markets.

Also, the fund managers will attempt to profit from various cognitive and emotional biases displayed by companies and market participants.

But, it is recommended, that you invest in this mutual fund scheme through Systematic Investment Plan (SIP).SIP is a much better and safer option for investing in equity oriented mutual funds.

Investing in mutual funds online is simple and paperless. Simply log in to your Groww account, choose a fund, and invest using net banking – exactly like you would when shopping online

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww