Fund Call. ICICI Prudential Select Large Cap: Scores with smart stock, sector calls

Investors can consider the pure large-cap-oriented ICICI Prudential Select Large Cap Fund. Signs of pick-up in economic growth, revival in corporate earnings and good progress of the monsoon have triggered a strong rally in stock prices since February. Thanks to this, ICICI Prudential Select Large Cap has delivered 14 per cent year-to-date returns, beating the 9 per cent return of the benchmark BSE 100. Moreover, over the past one year, the fund has given 7.2 per cent returns, outshining the benchmark as well as the category average return of 2 per cent.

Over longer periods of three and five years, the funds has delivered gains of 21 per cent and 13 per cent, respectively. In these periods, the fund has beaten the benchmark by 3-5 percentage points. Rolling one-year returns since its inception show the fund beating the BSE 100 index over 82 per cent of the time. The fund used to allocate about 90 per cent to equities and actively take cash calls until late 2012. Thereafter, it started to invest in debt while maintaining the equity investment in the 86-95 per cent range.

Another large-cap fund from the same fund house, ICICI Prudential Focused Bluechip Equity, focuses more on growth stocks and its portfolio is well-diversified. ICICI Prudential Select Large Cap has a blend of growth and value stocks. Its portfolio is compact and the fund holds fewer than 20 stocks. While both the funds have delivered similar returns in the long term, ICICI Prudential Select Large Cap has beaten its peer on one-year returns.

From a portfolio of more than 30 stocks earlier, the fund began trimming its holdings in mid-2014. It currently holds 14-18 stocks and takes a bit of concentrated bets. The top 10 stocks comprise 73 per cent of its portfolio. Sun Pharma, ICICI Bank and HDFC Bank are the top three preferred stocks now, with over 8 per cent allocation in each.

Banking is the most preferred sector, with the fund holding about 30 per cent of its portfolio in this space. The under-performance of the fund in 2015 could be attributed to the weakness in the banking sector. However, pick-up in the banking sector this year has boosted the fund’s performance. HDFC Bank, which is hovering at an all-time high, has given good returns for the fund. ICICI Bank as well as Axis Bank are also in revival mode. Finding value in public sector banks, the fund added Punjab National Bank recently.

The fund exited the oil and gas sector apart from non-ferrous metals, consumer durables and consumer non-durables over the last six months. It has increased its bet on pharma stocks and has added Sun Pharma to its kitty as a value buy.

It has marginally reduced its exposure in the auto mobile sector by trimming its holding in Tata Motors. Another value pick the fund added last December in the cement space is Ambuja Cements. It has upped its stake to 5 per cent here. Also, its exposure to Grasim has yielded excellent returns in the cyclical space.

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