Fund Call: ICICI Pru Dynamic - Cautious stance provides comfort

The large-cap tilt in equities and sound debt calls make it a safe long-term buy

If the sharp rise in the equity markets in 2017 is giving you sleepless nights, you can consider investing ICICI Pru Dynamic Fund.

A conservative option among diversified equity funds, Pru Dynamic helps contain the downside in volatile and falling markets by taking cash and debt calls. Even in its equity holdings, the fund usually sports a large-cap bent.

These two features would come in handy in limiting losses should the markets correct from here on. It is, hence, an appropriate choice for investors who do not wish to take high risks at this point in time.

In the last one year, the fund’s performance has been a tad below its benchmark, the Nifty 50. A major reason for this is its decision to hold a good chunk of its assets in debt/cash.

Considering the rising markets and burgeoning valuations in the last year, the fund has been on the defensive, holding only 65-75 per cent in equities.

Long-term performance

Besides, even as many mid-and small-cap stocks (stocks with market capitalisation of less than ₹10,000 crore) continued to outperform over the last year, the fund has reduced its holdings in this segment from about 15 per cent early in the year to around 9 per cent as per its latest portfolio.

But over the long term, the fund’s moves have paid off. Over three- and five-year periods, the fund has outpaced its benchmark Nifty 50 by 4-5 percentage points.

This performance is better than peers such as Invesco India Dynamic Equity and L&T Dynamic Equity.

Pru Dynamic has a well-diversified basket of stocks, numbering over 50 at any point in time. Banks always remain the top sector choice; top holdings in this space are ICICI Bank and SBI.

Portfolio

In the last year, the fund increased exposure to the defensive consumer non-durables space. ITC and GSK Consumer are some of the stocks its holds here. Headwinds in IT and pharma have seen the fund pare holdings in these segments by about 3 percentage points. Pharma stocks that saw holdings pared include Cipla, Sun Pharma and IPCA Labs.

In the debt segment, the holdings include NCDs of HDFC Bank (AA+) , Axis Bank (AA+), Sadbhav Infrastructure (A+) and Arvind Lifestyle (AA).

It is also invested in foreign equities such as Honda Motor Co and Skechers.

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