Bandhan Small-cap Fund: Best Buys and Strategic Sells of 2024

The Bandhan Small Cap Fund-Reg(G) has emerged as a noteworthy player in the small-cap segment, attracting investors interested in the growth potential of small-cap stocks. Managed by Manish Gunwani, the fund has seen significant attention and growth, reflected in its Assets Under Management (AUM) increasing from Rs 4,290 crore in January 2024 to Rs 4,994.2 crore in April 2024, marking a growth of 16.41%.

Fund Overview

The fund, launched on February 25, 2020, has a relatively recent inception date but has already established a strong presence in the small-cap segment. Over the past year, it has delivered an impressive return of 70.85% and a compound annual growth rate (CAGR) of 27.55% over three years. The fund is benchmarked against the S&P BSE 250 Small Cap – TRI

With an expense ratio of 1.81%, which is slightly below the median for similar funds, the Bandhan Small Cap Fund offers a cost-effective option for investors. The fund’s Net Asset Value (NAV) is Rs 37.83, with a 52-week high of Rs 38.16 and a 52-week low of Rs 22.36.

High Turnover and Active Management

The fund’s turnover ratio is quite high at 91%, compared to the median of 38%. A high turnover ratio suggests frequent trading, leading to higher transaction costs and potential tax implications for investors. However, it also indicates active management aimed at capitalising on market opportunities, which has contributed to the fund’s impressive performance.

Risk-Adjusted Metrics

In terms of risk-adjusted metrics, the fund’s Alpha stands at 39.82, considerably higher than the median Alpha of 24.38, indicating superior risk-adjusted performance. The Sharpe and Sortino ratios are 3.79 and 5.42 respectively, above the median values of 2.95 and 4.37, suggesting that the fund has provided higher returns per unit of risk taken. The fund’s Beta is 0.78, slightly above the median of 0.68, indicating marginally higher market risk. Its standard deviation is 14.14, higher than the median of 12.63, suggesting greater volatility. However, the fund’s high returns may justify the additional volatility for risk-tolerant investors.

Key Increases in Holdings

Since January 2024, the Bandhan Small Cap Fund has significantly increased its holdings in several companies. The most notable increases are:

Key Decreases in Holdings

Conversely, the fund has reduced its holdings in several companies, with the most significant decreases being:

Complete Divestments

In April 2024, the fund completely divested its holdings in several companies. This action signifies a full divestment, removing them entirely from the fund’s portfolio. The companies from which the fund has divested include Bank of India, which previously constituted 0.78% of the fund’s AUM, and Hindustan Petroleum Corporation Ltd, which made up 0.74% of the AUM. Other notable divestments include Indian Bank, previously at 0.59% of AUM, Coal India Ltd at 0.58% of AUM, and Swan Energy Ltd at 0.54% of AUM. These divestments indicate a strategic move away from financial and energy stocks, as the fund repositions its portfolio towards other opportunities.

New Positions

Simultaneously, the Bandhan Small Cap Fund initiated new positions in various companies, marking fresh investments within its portfolio. The fund’s new holdings include Rashi Peripherals Ltd, which now constitutes 1.53% of the AUM, The South Indian Bank Ltd at 0.95% of AUM, and Maruti Suzuki India Ltd at 0.9% of AUM. Other new additions include Glenmark Pharmaceuticals Ltd, comprising 0.87% of the AUM, and Shilpa Medicare Ltd at 0.85% of AUM. These new positions highlight the fund’s strategic alignment towards technology, banking, and healthcare sectors, reflecting its dynamic investment approach aimed at capturing growth opportunities in these areas.

Sectoral Analysis and Trends

The changes in the Bandhan Small Cap Fund’s portfolio indicate a strategic shift towards specific sectors. The increased holdings in companies like Kewal Kiran Clothing Ltd and Quess Corp Ltd suggest a growing interest in the consumer goods and service sectors. Conversely, the reduced holdings in companies such as Wheels India Ltd and Shriram Finance Ltd reflect a decreased focus on automotive and finance sectors.

The complete divestment from companies such as Bank of India and Hindustan Petroleum Corporation Ltd highlights a significant restructuring of the fund’s portfolio, moving away from certain financial and energy stocks. The initiation of new positions in companies like Rashi Peripherals Ltd and The South Indian Bank Ltd underscores a strategic realignment towards sectors such as technology and banking.

Investors following the fund’s performance should closely monitor these developments and their impact on the fund’s overall returns.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.