ICICI Prudential Multicap: Promising blend of stability and spice

Long-term investors could invest in this fund through a systematic investment plan

Missed the rally in mid- and small-cap stocks? Investors with a moderate risk appetite still wanting a piece of the action can bet on multi-cap funds.

While large-cap stocks offer stability in overheated markets, exposure to mid-caps can spice up returns.

ICICI Prudential Multicap, which follows a growth strategy, has outperformed its benchmark, the BSE 200, by 5-7 percentage points over the last one-, three- and five-year periods.

Over the past three- and five-year periods, the fund is perched on the top quartile within funds in the multi-cap category.

Over the long term, the fund has delivered returns that are on par with its peers such as Kotak Opportunities, Birla Sun Life Equity and Mirae Asset India Opportunities. Investors with a longer holding period could consider investing in this fund through the systematic investment plan (SIP) route.

Performance and strategy

Following a strong rally in the year 2014, the fund continued to outshine its benchmark as well as the category in 2015 and 2016 due to its shift from a more large-cap-focussed approach to a multi-cap strategy.

The fund invests 90-95 per cent in equities, in which it follows predominantly a growth strategy.

Over the last one year, the fund has witnessed churn in its sector holdings. Pharma, which was the top preferred sector a year back, has seen a decrease in allocation due to the under-performance of stocks in this space.

It has exited sectors such as construction projects, oil, power and minerals. On the other hand, the fund has taken exposure in consumer durables, petroleum products, chemicals, gas and telecom.

After taking its exposure to banks to as high as 21.8 per cent over the past year, the fund has now trimmed its holdings to 10.3 per cent.

This sector still remains the top preferred sector. But, interestingly, the fund has upped its allocation in software which has also been under-performing.

Barring a few stocks that the fund has held for a long period, the churn in stocks has also been high. The fund invests in a wide range of 56-60 stocks, which helps diffuse the risk.

Solar Industries India, Karur Vysya Bank, Suprajit Engineering and Fag Bearings India are some of the mid-cap stocks that have performed well over the last six months.

After exiting HDFC Bank and Kotak Mahindra Bank, the fund has taken exposure in State Bank of India and Oriental Bank of Commerce recently. It is underweight in financials, automobiles, energy and FMCG sectors when compared with its benchmark.

On the other hand, it is overweight on software and pharma. Currently, the fund holds 48 per cent of its equity portfolio in mid-cap stocks.

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