SBI Magnum Midcap Fund Review

SBI Magnum Midcap Fund invests in stocks of midcap companies. Midcap companies are those companies whose market capitalization at the time of investment is lower than the last stock in the S&P CNX Nifty Index less 20% (upper range) and above Rs. 200 crores.

It is an Open-Ended Growth Equity Fund launched in 2005. The Benchmark index is Nifty Midcap 200 Index. The Asset Under Management (AUM) is Rs 1326 crores. To know more about the Fund Facts read this.

SBI Magnum Midcap Fund, being an equity oriented fund is primarily invested in stocks (92%) across 14 sectors, with balance debt, cash and cash equivalents. To know more about its composition read this.

The Top 5 Holdings of SBI Magnum midcap mutual fund are as below.

  • Cholamandalam Investment & Finance Co. Ltd.
  • The Ramco Cements Ltd.
  • Strides Shasun Ltd.
  • Dr. Lal Pathlabs Ltd.
  • PI Industries Ltd.

Together they account for 20.8% of the funds corpus.

Methodology of the Analysis

First I obtained daily NAV data of SBI Magnum Midcap Fund (g) from 2005 onwards. The data is from Feb 2005 to Mar 2016. I downloaded the data from SBI Mutual Fund website here.

Then I estimated the rolling 1 year, 2 years, 3 years, 4 years, 5 years, 6 years and 7 year returns.
After that, I calculated a number of simple but informative statistical formulas on the returns data.
– Average, Maximum and Minimum Returns.
– Standard Deviation – This gives us an indication of the variability of the data.

SBI Magnum Midcap Fund – 1 Year Returns Analysis

SBI magnum midcap fund review - 1 year Returns

Average 1 year rolling return is 24%. However standard deviation is a massive 42%, which indicates a huge variability.

If we were to assume that the returns are normally distributed, then we can conclude the following.

  • There is a 68% probability that returns could be between -16% and 66% in any 1 year period which is not at all helpful.
  • There is a 95% probability that returns could be between -59% and 108% in any 1 year period.

Conclusion: In other words anything can happen in a 1 year period. There is absolutely no predictability.

SBI Magnum Midcap Fund – 3 Year Returns Analysis

SBI magnum midcap fund review - 3 year Returns

Average 3 year rolling return is a low 11%, which is 13% lower than 1 year returns. However standard deviation has now come down 17%, which is still on the higher side.

If we were to assume that the returns are normally distributed, then we can conclude the following.

  • There is a 68% probability that returns could be between -5% and 28% in any 3 year period.
  • There is a 95% probability that returns could be between -22% and 44% in any 3 year period.

Conclusion: While variability has definitely come down, the average returns have come down drastically.

SBI Magnum Midcap Fund – 5 Year Returns Analysis

SBI magnum midcap fund review - 5 year Returns

Average 5 year rolling return is 11%, same as 3 years average rolling. However standard deviation has now come down further to 10%.

If we were to assume that the returns are normally distributed, then we can conclude the following.

A person who invests in SBI Magnum Midcap can say with 68% certainty that he would not lose his capital.
On the positive side, there is a 68% probability that he could make as much as 21%.

There is a 95% probability that returns could be between -10% and 32% in any 5 year period.

SBI Magnum Midcap Fund – 7 Year Returns Analysis

SBI magnum midcap fund review - 7 year Returns

Average 7 year rolling return is 10%, slightly lower than 5 years average rolling returns. However standard deviation has now come down further to 4%, which is quite favorable.

If we were to assume that the returns are normally distributed, then we can conclude the following.

  • There is a 68% probability that returns could be between 6% and 15% in any 7 year period, which is good.
  • What this means is that if one were to invest in SBI Magnum Midcap Fund and hold it for 7 years, he could with 68% probability at least get returns higher than a Saving account. On the plus side, he may get as high as 15%, which while not very high, is still quite good.
  • In any 7 year rolling period, there is a 95% percent chance that the lowest returns would be 2% with a high of 19%.

Conclusion

  • Predictability of returns of SBI Magnum Midcap Fund seems to increase with increased holding period, accompanied by a reduction in variability.
  • Long term returns (7 years) for this fund has been around 10%, with a maximum of 28%, minimum of 1% and average of 10%, which is a a rather mediocre number. However, such performance might not repeat in the future.
  • SBI Midcap Magnum Fund has underperformed the market (CNX NIFTY).

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A Few Last Words

Before making any investment decision, please contact your financial adviser.

I do not own SBI Magnum Midcap Equity Fund.

I am not registered with SEBI under SEBI (Research Analysts) Regulations, 2014. I do not offer any opinion concerning securities or public offers. Whatever analysis I provide is through public media only on Mkerj. I am not covered under RA Regulations.

I have provided this article for educational purpose only.

I hope you found this article on SBI Magnum Midcap Fund Analysis useful. If you have something to add please leave a comment in the post. Please feel free to contact me.

Subhodeep Mukhopadhyay

I am a Management Consultant in the Education Sector. In my previous corporate career, I have worked in Banking, Private Equity and Software industry. I am an MBA in Finance/ Computer Engineer and enjoy doing equity research and financial analysis in my free time.

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