ICICI Prudential Multicap: Large-cap tilt pays off

The fund continues to outshine the category average and benchmark over the last year

Investors looking for steady returns in multi-cap funds can buy units of ICICI Prudential Multicap, a consistent long-term outperformer. The fund invests across large-, mid- and small-cap stocks to generate capital appreciation. It has outperformed the new benchmark index — S&P BSE 500 TRI — over the long term (five- and 10-year periods).

Though the fund has underperformed slightly over the past three years, it continues to outshine the category average and benchmark over the last one year. It is among the top quartile of funds, going by year-to-date returns.

Relying on large-cap stocks has helped the fund’s performance so far this year.

However, considering its multi-cap approach, long-term returns can be spiced up with exposure to mid- and small-caps.

Investors with a moderately high-risk appetite can buy the fund through the systematic investment plan (SIP) route to mitigate risks.

Except for the change in benchmark from the S&P BSE 200 to the BSE 500, there has been no major change in the attributes of this fund due to SEBI’s new scheme categorisation norms.

The fund's performance over the last one year has beaten some of the well-known funds — SBI Magnum Multicap, Motilal Oswal Multicap 35, and Kotak Standard Multicap.

 

 

Performance and strategy

The fund has about 90-97 per cent exposure to equities currently.

Following good performance in the calendar years — 2015 and 2016 — the fund had underperformed the benchmark in 2017, as it had a slightly higher exposure to software and healthcare sectors that were not doing well.

That said, the fund began to up its holding in software this January, and subsequent recovery in this sector has helped shore up its NAV.

Given the choppy markets, the fund has also increased its allocation to pharma and consumer non-durables; the latter is the most-preferred sector, followed by banks.

Bounce-back in stocks such as Sun Pharma, Torrent Pharmaceuticals, ITC and Dabur India will benefit the portfolio.

Further, it is also bullish on auto ancillary and non-ferrous metal. Besides, stocks such as Motherson Sumi Systems, Bosch and Vedanta have entered the portfolio over the last five months.

ICICI Prudential Multicap has also increased stake in the automobile and power sectors through stocks such as Maruti Suzuki India, Hero MotoCorp and NTPC. Currently, the fund holds about 31 stocks, which are relatively compact compared with its early holding of 55-60 stocks a year-and-a-half back. Blue Dart Express and Alembic Pharmaceuticals are key mid-cap stocks in the kitty.

Compared to the benchmark, the fund is underweight in financial, construction and chemicals, while it is overweight in many sectors duch as automobile, energy, FMCG and healthcare.

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