Exposure to large-caps pays off - Buy

Besides tiding over volatility, the fund’s returns have beaten its benchmark

Aditya Birla Sun Life Advantage is a good option to tide over market volatility. The fund’s relatively higher exposure to large-cap stocks makes it a prudent choice at this juncture. Its exposure to large caps (those with market capitalisation above ₹10,000 crore) has been relatively higher at about 90 per cent through 2017, as against some of its peers such as Aditya Birla Sun Life Equity and HDFC Capital Builder that have, on an average, held a lower 70-80 per cent in large-caps over the past year.

Even over a longer period of, say, two to three years, Aditya Birla Sun Life Advantage has had a relatively higher exposure to large caps. At the same time, the fund has been able to make the most of market rallies. In 2014, for instance, the fund gained a tidy 60 per cent, beating its benchmark by 25 percentage points and category returns by 12 percentage points. Through 2014, the fund held a higher 30-odd per cent in mid-cap stocks, raking in tidy gains.

 

 

 

The fund’s returns have been higher than its benchmark by 5-8 percentage points over a three and five-year period. In the short term, over a one-year period, the fund has underperformed its benchmark and category by 2-4 percentage points. But much of the underperformance has been in the past two months; in fact, in 2017, the fund continued to outperform its benchmark and category.

In fact, on a one-year rolling return basis, it has outperformed its benchmark 88 per cent of the time in the last one year. Over a three-year period, it has outperformed the benchmark 94 per cent of the time.

Investors can buy units of the fund through the SIP route to mitigate the risk of volatility.

Juggling portfolio

By the end of 2017, the fund had sharply trimmed its exposure to the IT sector, exiting stocks such as Infosys, HCL Technologies and Tech Mahindra. During January 2018, it has once again taken some exposure within the sector, with Infosys entering its portfolio (3.08 per cent of assets). Exposure to defensive stocks in the current market can offer stability. After slightly trimming its exposure to private bank stocks in 2017, from 14 per cent to 13 per cent of portfolio, it has once again upped its holdings in such stocks substantially to 17.2 per cent as of Jan 2018, while trimming exposure to public sector bank stocks.

The fund has increased its holdings in HDFC Bank, and YES Bank over the past month, while sharply reducing its exposure to Bank of Baroda. Given the recent turmoil in PSB stocks, taking shelter in better performing bank stocks with sound fundamentals, appears to be a prudent move.

In the past one year, increasing exposure to stocks such as Tata Steel, Voltas, HDFC Bank, ICICI Bank and TVS Motors and adding L&T, Reliance Industries and Titan Company, have paid off handsomely.

Top 10 stocks of the funds include HDFC Bank, Reliance Industries, ICICI Bank, Maruti Suzuki and State Bank of India.

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