Quarterly Update April 2020

IDFC Large Cap Fund

(Large Cap Fund -An open ended equity scheme predominantly investing in large cap
stocks)

The fund aims to generate steady returns by investing in sector leader stocks in the chosen sectors,
predominantly in the large cap universe. The portfolio approach is based on a robust three pillar
strategy:
 Buying the right sectors – Identifying and investing in the right sectors with a flexibility to have
large deviation from the benchmark sector weights.
 Buying the sector leaders - Investing in the sector leader companies having strong
fundamentals, solid execution track record as well as resilient balance sheet to withstand any
cyclical downturns.
 Tactical allocation to mid/small caps – Opportunistic allocation to take advantage of any
mispriced opportunities or a benevolent risk-on environment.
The fund has a “Growth” and “Quality” oriented investment style, and focuses on companies having
strong visibility of earnings growth coupled with healthy return on capital employed.

Performance Update
During the quarter the fund outperformed the benchmark (S&P BSE 100 Index) by 4.5%. During the
same period, the small cap index (Nifty Small cap 100 Index) and the mid cap index (Nifty Mid cap 100
Index) underperformed the large cap index (Nifty 50 Index).

% return during the quarter Mar-20 Market cap mix Fund Benchmark OW/UW
Fund -24.3% Large cap 85% 96% -12%
Benchmark -28.8% Mid cap 5% 3% 2%
Small cap 4% 0.3% 3%
Nifty 50 TRI -29.1% Cash 7% 7%
Nifty Mid cap 100 TRI -31.3%
Nifty Small cap 100 TRI -38.1%

At a sectoral level, the top positive contributors were Commodities (UW), Autos (UW) and Consumer
Staples (UW). The top 3 negative contributors were Consumer Discretionary (OW), Industrials (OW)
and Cement/Building Materials (OW).
Top 3 positive contributors Sector OW/UW Top 3 negative contributors Sector OW/UW
Commodities Underweight Consumer Discretionary Overweight
Autos Underweight Cement / Building Materials Overweight
Consumer Staples Underweight Industrials Overweight

Source: Bloomberg Attribution report for Jan-Mar’20 quarter. Contribution takes into account allocation as well
as selection effect

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Quarterly Update April 2020

What worked
Large part of the outperformance was driven by better stock selection especially in sectors like
Commodities, Auto, IT and Energy where portfolio was underweight compared to benchmark.
Similarly, within the overweight sectors, stock selection has been better in sectors like Healthcare and
Financials. Some of the stocks which outperformed were IPCA, HUL, Nestle and Divis and Majesco.
Not having exposure to some of the stocks in benchmark which corrected sharply during the quarter,
helped the fund contain the downside. (Eg:- Financials – IndusInd Bank, Indiabulls Housing, RBL Bank,
Mahindra Finance and PSU Banks; Autos - Tata Motors, Vedanta, Bharat Forge and Ashok Leyland;
Commodities - Hindalco, Vedanta; Industrials - BHEL; Media - Zee)

What did not work

While the selection return has been positive for Consumer Staples, having a lower relative weight than
the benchmark has negatively impacted the performance. Similarly, having nil allocation to Utilities
and a lower weight in IT had negative impact on the performance. Some of the stocks which negatively
impacted the performance were mostly from the mid/small cap space namely – Aavas, Prince Pipes, JK
Cement, Heidelberg Cement and PSP Projects.

Key changes during the quarter

Mar-20 Dec-19 Change during the

Sector/Weight Fund Benchmark OW/UW Fund Qtr
Consumer Discretionary 8.4% 4.6% 3.8% 4.3% 4.1%
Health Care 7.1% 4.2% 2.9% 2.7% 4.5%
Telecommunication Services 5.3% 2.5% 2.8% 1.5% 3.8%
Cement / Building Mat 3.2% 2.2% 1.0% 3.9% -0.7%
Commodities 2.4% 2.7% -0.4% 2.2% 0.2%
Financials 34.3% 34.8% -0.5% 41.3% -7.1%
Industrials 2.7% 3.8% -1.1% 4.3% -1.6%
Energy 9.0% 10.7% -1.8% 8.9% 0.1%
Auto 3.4% 5.3% -1.9% 4.4% -1.1%
Information Technology 11.7% 13.8% -2.1% 10.4% 1.3%
Utilities 0.0% 2.7% -2.7% 0.0% 0.0%
Consumer Staples 6.0% 12.6% -6.6% 7.9% -1.9%

During the quarter, the fund increased exposure towards Healthcare, Telecom and Consumer
Discretionary primarily, while reducing Financials, Consumer Staples, Industrials and Autos.

Portfolio stance – Key sectors

Consumer Discretionary
The domestic consumption story of India has abruptly hit an air pocket led by an immediate demand
impact led by the COVID19 pandemic. However, the long term structural growth drivers of favourable
demographics, rising middle class with increasing share of discretionary spends remains firmly in place.

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Quarterly Update April 2020

Healthcare
Indian pharma sector has not done so well in the past few years led by lingering US FDA related issues
and continuous pricing pressure in the US market. The domestic pharma players however have been
clocking steady growth. The recent COVID19 related developments in the world markets and the ability
of Indian companies to play an important part in this epidemic has brought back the sector in focus.
Telecom
Telecom sector has one of the strongest visibility of earnings led by the tariff hikes that has been taken
by the players in the recent past. Though there are a few uncertainties regarding the AGR dues,
companies with stronger balance sheet should be able to navigate through it successfully.

Fund – Key metrics

Portfolio Metrics Fund Benchmark Commentary

FY 20 EPS growth 16.0% 9.8% Fund’s earnings growth is higher than the benchmark,
primarily led by higher exposure to high growth sectors.
PE Ratio 16.6 16.1 Valuation (PE Ratio) is broadly in line with the benchmark.
P/B ratio appears higher exposure to the private sector
PB Ratio 3.1 2.1 Financials & Consumer Discretionary.
Source: Bloomberg

Fund Manager Commentary

The fund outperformed the benchmark by 450 bps during the quarter. A large part of this performance
has emerged from a better stock selection. Our investment approach has been driven by the three
pillar strategy of having exposure to the right sectors, buying sector leaders and taking some tactical
benefit of mid/small caps.
Markets have witnessed a heavy sell off since the highs of mid-January, led by fears of the negative
economic impact that the COVID19 pandemic will have in the near term. At the same time this has
been accentuated by heavy FPI selling in some of the over owned sectors.
In the given context, we have been re-aligning the portfolio in line with our three pillar strategy and
have made some changes. Exposure to high beta sectors like Financials has been trimmed materially.
In addition, we have also exited a couple of the mid/small cap positions. Sectors like Telecom and
Healthcare have seen an increase in weight supported by our view of near term earning growth
visibility.
The near term outlook in the overall economic growth is a bit soft and equity markets have responded
to it to a large extent. Though central bank and the government have responded with many measures,
the first leg of recovery is largely dependent on how quickly we are able to overcome this tragic
COVID19 epidemic. Stay Safe!

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Quarterly Update April 2020

Fund positioning – Stable & Cyclical Framework

Fund Stable Cyclical Total Benchmark Stable Cyclical Total

Large Cap 61% 30% 90% Large Cap 61% 36% 96%
Mid Cap 6% 0% 6% Mid Cap 2% 1% 3%
Small Cap 1% 3% 4% Small Cap 0.3% 0.03% 0.4%
Total 68% 32% Total 62.9% 37%

Stable Sectors: Retail Banks & NBFC’s, IT, Consumer Staple & Discretionary, Auto, HealthCare
Cyclical Sectors: Corp Banks & NBFC’s, Energy & Utilities, Industrials, Cement, Commodities, Telecom

Stable & Cyclical Exposure with Top 3 Stocks in each sector

Cyclical Stable

Cyclical Fund Benchmark Stable Fund Benchmark

Banks - Corp 7.6% 9.6% Banks - Retail 13.9% 13.2%
ICICI 5.4% 5.1% HDFC 8.9% 9.0%
AXIS 2.2% 2.2% KOTAK MAHINDRA 5.0% 3.5%

Energy 8.9% 10.7% Information Technology 11.6% 13.7%

RELIANCE 8.9% 8.7% INFOSYS 6.7% 5.8%
TATA CONSULTANCY 4.9% 4.8%

Industrials 2.7% 3.8% NBFC - Stable 12.4% 10.9%

LARSEN & TOUBRO 2.7% 2.4% HOUSING DEV FIN 6.8% 7.0%
BAJAJ FINANCE 2.7% 1.3%
AAVAS FINANCIERS 1.7% 0.0%
Commodities 2.4% 2.7% Consumer Staples 6.1% 12.8%
FINE ORGANIC 2.4% 0.0% HINDUSTAN UNILEVERS 4.4% 4.1%
NESTLE INDIA 1.7% 1.5%

Cement / Building Mat 3.2% 2.2% Auto 3.4% 5.3%

ULTRATECH CEMENT 3.2% 0.9% MARUTI SUZUKI 1.9% 1.4%
BAJAJ AUTO 1.5% 0.7%

Telecom. Services 5.3% 2.5% Health Care 7.2% 4.2%

BHARTI AIRTEL 5.3% 2.2% IPCA LABS 2.6% 0.0%
DR REDDY'S LABS 2.4% 0.9%
DIVI LABS 2.2% 0.6%
Consumer Discretionary 8.4% 4.6%
AVENUE SUPERMART 3.3% 0.6%
TITAN 2.2% 0.9%
ASIAN PAINTS 1.8% 1.8%

The sectors / stocks mentioned should not be construed as an investment advice from IDFC Mutual Fund and IDFC Mutual
Fund may or may not have any future position in these sectors / stocks.
st
All data as on 31 March 2020

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Quarterly Update April 2020

Fund Performance

Performance based on NAV as on 31/03/2020. Past performance may or may not be sustained in future.The performances given are of regular plan growth
option. Regular and Direct Plans have different expense structure. Direct Plan shall have a lower expense ratio excluding distribution expenses, commission
expenses etc. #Benchmark Returns.The fund has been repositioned from an IPO fund to a large cap fund w.e.f. April 18, 2017. Current Index performance
adjusted for the period from since inception to June 28, 2007 with the performance of S&P BSE 100 price return index (Benchmark). The Fund Manager of
the fund is Mr. Mr. Sumit Agrawal & Mr. Arpit Kapoor (w.e.f. 1st March 2017).

Other Funds managed by the Fund Manager

Performance based on NAV as on 31/03/2020 Past Performance may or may not be sustained in future. The performance details provided herein are of
regular plan growth option. Regular and Direct Plans have different expense structure. Direct Plan shall have a lower expense ratio excluding distribution
expenses, commission expenses etc. 2The fund has been repositioned from an IPO fund to a large cap fund w.e.f. April 18, 2017. §Current Index
performance adjusted for the period from since inception to June 28, 2007 with the performance of S&P BSE 100 price return index (Benchmark). 5The
fund has been repositioned w.e.f. May 28, 2018 and since will invest only in the schemes of IDFC Mutual Funds

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Quarterly Update April 2020

Disclaimer: MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
The Disclosures of opinions/in house views/strategy incorporated herein is provided solely to enhance the transparency about the investment strategy /
theme of the Scheme and should not be treated as endorsement of the views / opinions or as an investment advice. This document should not be
construed as a research report or a recommendation to buy or sell any security. This document has been prepared on the basis of information, which is
already available in publicly accessible media or developed through analysis of IDFC Mutual Fund. The information/ views / opinions provided is for
informative purpose only and may have ceased to be current by the time it may reach the recipient, which should be taken into account before
interpreting this document. The recipient should note and understand that the information provided above may not contain all the material aspects
relevant for making an investment decision and the security may or may not continue to form part of the scheme’s portfolio in future. Investors are
advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. The
decision of the Investment Manager may not always be profitable; as such decisions are based on the prevailing market conditions and the understanding
of the Investment Manager. Actual market movements may vary from the anticipated trends. This information is subject to change without any prior
notice. The Company reserves the right to make modifications and alterations to this statement as may be required from time to time. Neither IDFC
Mutual Fund / IDFC AMC Trustee Co. Ltd./ IDFC Asset Management Co. Ltd nor IDFC, its Directors or representatives shall be liable for any damages
whether direct or indirect, incidental, punitive special or consequential including lost revenue or lost profits that may arise from or in connection with the
use of the information.