Top 5 Best Focused Mutual Funds to Invest in India

What are Focused Mutual Funds?

Focused Mutual funds are a collection of stocks that are similar in some aspects. These equity funds follow the strategy of the concentrated portfolio, which has no more than 30 stocks as per the regulations. However, it doesn’t have any limitation on market cap and sectors from which stocks can choose. 

The main idea behind focused mutual funds is to limit diversification, which increases the returns but at the same time also limits the risk profile and volatility.  It follows the quality over quantity approach. It is particularly suitable for those investors who want more exposure to growth opportunities but also want to control the risk that comes with it.  

A sector fund is the type of focused fund which will hold stocks in a company belonging to a particular market sector or industry. It gives precise exposure to a particular segment of the market rather than the whole stock market. 

Focused Mutuals Funds are very popular in India because of the large variety of sectors and sub-sectors existing in the economy. Due to this, there is a requirement for a large number of investment options that will guide the investor through complex market conditions. Focused Mutual funds are for those who want to invest in a specific market segment but don’t have the necessary expertise and time to research and manage their investment portfolio. 

Top 5 Focused Mutual Funds to Invest in 2023:

The goal of a focused equity fund is to generate good returns by investing in companies from the same background. They could either belong to the same industry or can be based in a particular region or provide the same technologies or have similar business models. Here is the list of the top 5 focused mutual funds to invest in 2023 to get maximum returns on your investments.

• SBI Focused Equity Fund.

SBI Focused equity fund invests a minimum of 65% in equity and the rests 35% in debt and other financial instruments. It invests in companies across market capitalisation and different sectors. Assets under management or AUM of SBI Focused Equity Fund is around Rs 27819 Crores. It is categorised as a high-risk mutual fund. Benchmark comparison is done against S&P BSE 500 Index. It was able to beat the benchmark S&P BSE 500 with returns of 14.44 % in the last 3 years. Its fund portfolio consists of stocks of companies like HDFC Bank Ltd, SBI, and Divi laboratories along with some US-listed companies such as Alphabet Inc and so on. 

• Nippon India Focused Equity Fund

This mutual fund has invested 90% in domestic equities out of which 54% of investments are in large-cap stocks, 6.7% in mid-cap stocks and 9.7% in small-cap stocks. It has invested in around 30 companies across market capitalisation such as Infosys Ltd, Larsen and Toubro Ltd, Axis Bank, State Bank of India, ITC Ltd and so on. The fund size or Assets under management (AUM) of Nippon India Focused Equity Fund is around Rs 6235 Crores with an expense ratio of 1.99%. Over the last 3 years, it has given annualised returns of 18.84 % and absolute returns of 68.01%.  

It is best suited for those kinds of investors who have in-depth knowledge of macro trends and make selective bets to gain higher returns. It is categorised as a high-risk and volatile mutual fund. It has a CRISIL Rank of 5. 

• HDFC Focused 30 Fund

HDFC Focused 30 Fund has given annualised returns of 19.32% and absolute returns of 70% in the last 3 years. It is categorised as a very high-risk mutual fund. It has 86.59% of its investments in domestic equities, out of which 60.39% is in large-cap stocks, 9% in mid-cap stocks and the rest 5.01 % in small-cap stocks. It has invested in companies like HCL Technologies, Bharti Airtel Ltd, Mahindra and Mahindra Ltd, HDFC Bank and so on. The Fund Size or AUM of HDFC Focused 30 Fund is Rs 3196 Crores with an expense ratio of 1.93%. CRISIL Rank, which compares the performance of mutual funds to its peers is 5.

• IIFL Focused Equity Fund

IIFL Focused Equity Fund has an asset under management of around Rs 3417 Crores with an expense ratio of 1.92%. It has a CRISIL rank of 3 and is categorised as a very high-risk mutual fund. Over the last 3 years, this focused equity fund has given annual returns of  18.01% and absolute returns of 64.48%. Its portfolio consists of 96% of equities, out of which 53.94% is invested in large-cap stocks, 14.08% in mid-cap stocks and 7% in small-cap stocks. It has invested in around 30 companies across market capitalisation such as Cummins India Ltd, Bharti Airtel Ltd, Tata Motors Ltd, APL Apollo Tubes Ltd, Axis Bank and so on. It has very high volatility with a beta of 0.87 as compared to the category average of 0.78. 

• Axis Focused 25 Fund

Axis Focused 25 fund has invested in 38 stocks across market capitalisation. It has 88.51% of its investments in domestic equities, out of which 65.04% of investments are in large-cap stocks, 15.19% in mid-cap stocks and the rest 8.28% in small-cap stocks. It has invested 1.55% in debt and government securities. It has also invested 10.90% in Future and Options.  It has given annual returns of 7.18% and absolute returns of 23.17% to its investors in past 3 years. CRISIL Rank of Axis Focused 25 fund is 1 and it is a very high-risk mutual fund. The fund size is Rs 16723 Crores and an expense ratio of 1.75%. It owns the stocks of many top-tier companies like Avenue Supermarts Ltd, Bajaj Finance Ltd, Housing Development Finance Corporation Ltd, Pidilite Industries Ltd and so on. 

Focused Mutual Funds should be selected on basis of their CRISIL Rank, Average Annual and Absolute returns over past years specifically over 1 year, 3 years and 5 years.