Last Updated on May 24, 2022 by
Equity investments can be made by directly buying stocks in the stock market or investing in equity mutual funds. Buying and selling equities might offer you overwhelming returns but also asks for extensive knowledge and time. It also exposes your capital to risk.
The second alternative is equity mutual funds that are managed by expert managers and have a proven track record.
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How do equity funds work?
Equity funds invest in the equity of different companies from different sectors in varying proportions. Fund managers select the stocks to invest in, considering the fund’s objective.
Equity funds must invest a minimum of 60% of their AUM (Assets Under Management) in equity shares. The remaining amount can also be invested in equity, or fund managers may decide to invest in debt schemes to hedge against risk.
Types of equity funds
SBI differentiates mutual funds to give a better understanding to the investors. Let’s understand the categories of broad class equity mutual funds:
Large-cap funds
Equity funds that invest in large-cap stocks are called large-cap funds. Large-cap companies are the top 100 listed companies as per market capitalisation. SBI mandates large-cap funds to invest at least 80% of their AUM in large-cap stocks.
Mid-cap funds
Funds that prefer mid-cap companies for investing are mid-cap funds. They must stake at least 65% of their asset pool in companies that are ranked from 101 to 250 in terms of market capitalisation.
Small-cap funds
Funds that invest 65% or more of their pooled assets in companies ranked from 250 and ahead in terms of market capitalisation.
Flexi-cap funds
Such funds are free to explore among the equity class but are mandated to invest at least 65% of their investments in equity instruments.
Multi-cap funds
These funds are required to invest at least 75% of their pooled corpus among equity. Further, they must also apportion 25% to large-cap, mid-cap, and small-cap.
ELSS funds
ELSS funds are required to invest 80% of their investments inequities. ELSS investments make you eligible for tax benefits up to Rs. 1.5 lakh under Section 80C of income tax. However, the ELSS scheme has a lock-in period of 3 yrs.
Best SBI equity mutual funds
Talking of equity funds, SBI mutual fund is the largest mutual fund in terms of assets under management. The AUM of the fund stood at ~Rs. 6.1 lakh cr. in September 2021.
Thanks to the widespread distribution channel of its parent company State Bank of India, and consistent performance, the fund has secured the trust of millions of investors.
Let’s explore some equity funds offered by SBI equity funds.
1. SBI Small Cap Fund
3-yr returns– 29.38%
Risk class– Very High
Fund Manager– Mr R Srinivasan
SBI Small Cap Fund invests predominantly in small-cap stocks with tremendous upside potential. Since small-cap companies are still in their growth stages, they can give higher returns than large-cap companies with steady cash flows. However, risks with small-cap companies are also very high. The fund has yielded a stellar 46% return in the past year as of 31 January 2022. The total assets under the management of the fund are ~Rs. 11,247.95 cr. as of 31 December 2021.
2. SBI Focused Equity Fund
3-yr returns– 22.6%
Risk class– Very High
Fund Manager– Mr R Srinivasan
As of 31 December 2021, the fund had an AUM of ~Rs. 23,732.25 cr. The fund invests in 30 companies across equity classes, and its benchmark index is S&P BSE 500. The minimum lump sum investment is Rs. 5, 000; however, a SIP can be started with Rs. 1,000.
3. SBI Contra Fund
3-yr returns- 25.33%
Risk class– Very High
Fund Manager– Mr Dinesh Balachandran
This is also one of the best SBI equity mutual funds. Since its inception, the fund has generated 19.04% returns, and its AUM stands at ~Rs. 3,545.68 cr. as of 31 December 2021. The fund has invested 77.03% of its pooled funds in Indian stocks, while 2.63% is invested in debt securities. The fund is suited for investors ready to take a fair amount of risk. The fund follows a contrarian strategy and thus makes only selective bets.
4. SBI Magnum Midcap Fund
3-yr returns– 26.49%
Risk class– Very High
Fund Manager– Ms. Sohini Andani
This fund has invested 99.23% of its investments in Indian stocks. As of 31 December 2021, the AUM of the fund was ~Rs. 6,803.92 cr. The benchmark index for the fund is Nifty Midcap 150, and 49% of their assets are invested in midcap stocks.
5. SBI Equity Minimum Variance Fund
1-yr returns– 25.38%
Risk class– Very High
Fund Manager– Mr Raviprakash Sharma
The fund believes in maintaining a low portfolio variance, and thus it has invested 99.51% of its assets in Nifty 50 companies. Since it’s a relatively newer fund, investors should consider the returns given by the fund since inception, which is decently placed at 16.57%.
Conclusion
Being the industry leader by asset size, SBI Mutual fund has goodwill to foster. It offers equity funds, among other funds set up to cater to varying investment goals. Equity funds always bear high-risk reasons, and only if your investment style allows you to take this calculated risk you can consider adding SBI equity funds to your portfolio.
