Picking a mutual fund based solely on past returns can be misleading. A fund may have delivered stellar gains, but did it achieve those returns by taking excessive risk? That’s where risk metrics such as alpha, beta, sharpe ratio and sortino ratio come into play.
An analysis of three Motilal Oswal schemes — Motilal Oswal Large and Midcap Fund – Direct Plan – Growth, Motilal Oswal ELSS Tax Saver Fund and Motilal Oswal Flexi Cap Fund – Direct Plan – Growth — shows that all three have not only outperformed their respective benchmarks but have also generated meaningful excess returns on a risk-adjusted basis.
Notably, the Motilal Oswal Large & Midcap Fund and Motilal Oswal ELSS Tax Saver Fund – Direct Plan – Growth currently have the highest alpha in their respective categories, while the Flexi Cap Fund ranks among the top performers in the flexi-cap space.
Before diving into the numbers, it is important to understand what alpha means. Alpha measures a fund’s ability to generate returns above what would normally be expected for the level of risk taken. A higher alpha generally indicates stronger stock selection and portfolio management.
Key risk metrics at a glance
| Fund | Alpha | Beta | Sharpe Ratio | Sortino Ratio | Standard Deviation |
| Motilal Oswal Large & Midcap Fund | 10.49 | 1.19 | 0.9 | 1.14 | 21.37 |
| Motilal Oswal ELSS Tax Saver Fund | 8.8 | 1.16 | 0.84 | 1.09 | 21.38 |
| Motilal Oswal Flexi Cap Fund | 5.7 | 0.95 | 0.77 | 1.03 | 17.35 |
(Source: Value Research)
Information Ratio is for 3-years as per AMC disclosure. All other risk measures have been calculated using calendar month returns for the last three years.
The numbers indicate that all three funds have generated substantial excess returns over their benchmarks. The Large & Midcap Fund tops the list with an alpha of 10.49, followed by the ELSS Tax Saver Fund at 8.80 and the Flexi Cap Fund at 5.70. These alpha figures broadly suggest that the funds have outperformed what would typically be expected from their risk profiles.
Motilal Oswal Large & Midcap Fund: Category leader with the highest alpha
Among the three schemes, Motilal Oswal Large & Midcap Fund stands out with the highest alpha of 10.49. The fund also has the highest Information Ratio among the three, indicating stronger risk-adjusted outperformance against its benchmark.
The fund delivered a mean return of 25.02%, significantly ahead of both the BSE Large Mid Cap TRI benchmark (13.15%) and the category average (16.58%). While its standard deviation of 21.37% indicates higher volatility, investors appear to have been compensated for taking that risk. Its Sharpe ratio of 0.90 and Sortino ratio of 1.14 are substantially higher than both the benchmark and category averages.
A beta of 1.19 suggests the fund is more sensitive to market movements than the broader market. In rising markets, that can amplify gains, although the reverse may also be true during market corrections.
Returns
The fund has been among the strongest performers in its category over both medium- and long-term horizons.
| Period | Fund Return | Benchmark | Category Average |
| 3 Years | 25.21% | 12.80% | 16.27% |
| 5 Years | 21.43% | 11.80% | 15.34% |
The fund outperformed its benchmark by more than 12 percentage points over three years and nearly 10 percentage points over five years, making it one of the best-performing schemes in the Large & Mid Cap category.
Portfolio
The fund’s portfolio is led by Muthoot Finance (5.37%), CG Power (5.27%), Eternal (5.05%) and MCX (5.03%). Other major holdings include Shriram Finance (4.29%), Suzlon Energy (4.21%), Premier Energies (4.15%), Onesource Specialty Pharma (4.05%), PTC Industries (3.99%) and Waaree Energies (3.86%).
Motilal Oswal ELSS Tax Saver Fund: Combining tax savings with strong alpha generation
The ELSS Tax Saver Fund has emerged as one of the strongest performers in the tax-saving category. With an alpha of 8.80, it currently ranks as the highest-alpha fund in the ELSS category.
The fund delivered a mean return of 23.93%, comfortably ahead of the BSE 500 TRI benchmark’s 13.86% and the category average of 14.62%. Like the Large & Midcap Fund, it has taken higher risk, reflected in its standard deviation of 21.38% and beta of 1.16. However, the higher risk has translated into superior returns.
Its Sharpe ratio of 0.84 and Sortino ratio of 1.09 indicate that investors have been rewarded well for the risk and downside volatility they assumed.
Returns
| Period | Fund Return | Benchmark | Category Average |
| 3 Years | 24.24% | 13.49% | 14.51% |
| 5 Years | 19.50% | 12.29% | 13.45% |
The fund outperformed both the benchmark and category averages by a wide margin across both time periods, making it one of the top-performing ELSS schemes over the last three and five years.
Portfolio
MCX (7.23%) is the fund’s largest holding. Other key positions include Onesource Specialty Pharma (4.78%), Zen Technologies (4.35%), Muthoot Finance (4.22%), Ather Energy (4.12%), Waaree Energies (4.04%), Jain Resource Recycling (4.01%), PTC Industries (4.00%), Suzlon Energy (3.97%) and Apar Industries (3.77%).
Motilal Oswal Flexi Cap Fund: Strong alpha with relatively lower market sensitivity
The Motilal Oswal Flexi Cap Fund presents a slightly different profile. While its alpha of 5.70 is lower than the other two funds, it is still among the highest in the flexi-cap category and ranks third on this parameter.
The fund delivered a mean return of 19.19%, ahead of both the BSE 500 TRI benchmark (13.86%) and the flexi-cap category average (14.87%). Unlike the other two schemes, however, it has managed to achieve this with relatively lower volatility.
Its standard deviation of 17.35% is the lowest among the three funds. More importantly, its beta of 0.95 is below 1, indicating that the fund is slightly less sensitive to market movements than the broader market. Despite this, it has maintained strong risk-adjusted performance, with a Sharpe ratio of 0.77 and a Sortino ratio of 1.03.
Returns
| Period | Fund Return | Benchmark | Category Average |
| 3 Years | 18.95% | 13.49% | 14.92% |
| 5 Years | 12.76% | 12.29% | 13.14% |
While the fund’s 5-year performance is broadly in line with category peers, its stronger 3-year showing suggests that its recent stock selection strategy has been effective.
Portfolio
The fund’s largest holdings are CG Power (6.60%), Kalyan Jewellers (6.25%) and Eternal (5.33%). Other major investments include Coforge (4.85%), Persistent Systems (4.62%), Waaree Energies (4.13%), Shriram Finance (4.12%), Ather Energy (3.88%), MCX (3.65%) and IndusInd Bank (3.56%).
What should investors keep in mind?
While alpha, Sharpe ratio and Sortino ratio are useful indicators of a fund’s historical ability to generate returns relative to risk, they are based entirely on past data. High alpha does not guarantee that a fund will continue to outperform in the future. Market conditions, portfolio positioning, fund manager decisions and sector trends can all influence future returns.
Investors should therefore use risk metrics as one part of the evaluation process rather than relying solely on past performance. Factors such as investment goals, risk appetite, asset allocation and investment horizon should remain central to any mutual fund investment decision.
Disclaimer: Past performance and risk metrics such as alpha, beta, Sharpe ratio and Sortino ratio are based on historical data and should not be construed as indicators of future performance. Mutual fund investments are subject to market risks, and investors should evaluate their financial goals, risk appetite and investment horizon before making any investment decisions. The information provided is for educational purposes only and should not be considered investment advice.
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