SBI Blue Chip Fund: Healthy returns over the long term

The fund’s good stock selection has helped it do well over extended periods

The ongoing market volatility is making even some good funds look pale. For instance, many large-cap funds with a healthy track record of out-performance have found themselves on the back foot over the past year.

Among these is SBI Blue Chip, whose one-year return of 7 per cent lags the 12 per cent return of its benchmark S&P BSE 100 TRI (Total Return Index) and the category average of 10.7 per cent.

But a year is not time enough to judge a fund’s performance. What matters more is the fund’s long-term record, and on this front, SBI Blue Chip continues to score well. Despite the setback over the past year, the fund’s nearly 18 per cent annualised return over five years is ahead of the benchmark by about 3 percentage points and places it in the top quartile in the large-cap category.

Performance

This is reflective of a robust investment process and good stock selection that holds the fund in good stead over long periods. Fund holders can stay invested while adopting a wait-and-watch approach to see if the fund makes a comeback. Also, current iffy market conditions make a case for staying put in less volatile large-cap funds, at a time when many mid-cap and small-cap stocks are taking a knock.

 

SBI Blue Chip’s under-performance over the past year seems to be, among factors, due to mistiming in some sector calls. For instance, until mid-2017 or so, the fund was underweight on financial and metal stocks which were having a good run, and was overweight on the beleaguered pharma sector. Later, it added exposure to financials while trimming exposure to pharma and software stocks. But some pharma and software stocks have staged a strong comeback, while some financials took a backseat. Paring stake early in Reliance Industries also worked against the fund.

These blips notwithstanding, SBI Blue Chip’s sector and stock picks have yielded healthy returns over the long term.

Over five years, stocks such as Maruti Suzuki, Motherson Sumi, Pidilite and HPCL have been multi-baggers.

SBI Blue Chip’s growth investing approach can mean bets on some expensive stocks. But this risk is reduced by a large portfolio of more than 50 stocks across sectors.

Investing strategy

The fund invests predominantly (more than 80 per cent of the corpus) in large-cap stocks while also taking some mid-cap exposure.

SEBI’s new categorisation norms that have taken effect from May 16, 2018 will not impact the portfolio profile, with the fund remaining predominantly a large-cap one. Earlier, the fund had an internal mandate to invest 70-100 per cent in equity. The new norms require it to invest 80-100 per cent in large-cap stocks.

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