ICICI Prudential Value Discovery: Buoyed by large-cap slant, value picks

The fund has the flexibility to go for stocks across the market capitalisation spectrum

A significantly higher exposure to large-cap stocks and value-based investment strategy make ICICI Prudential Value Discovery a good bet in choppy markets.

Notwithstanding its lacklustre performance in recent times, the fund has delivered category beating returns over the long run. The fund has been a top quartile fund within its category over five, seven and 10-year periods.

Deft moves

ICICI Pru Value Discovery, being a multi-cap fund, has been able to deftly juggle stocks across the market capitalisation spectrum. This has helped the fund cash in on rallies and contain downside better in volatile markets.

For instance, through most of 2013 and until mid-2014, the fund had 50-60 per cent of its assets in mid- and small-cap stocks. This helped it deliver chart-topping returns in the buoyant 2014 market. It subsequently trimmed its exposure to mid- and small-cap stocks. In fact, since then, the fund has upped its exposure to large-cap stocks significantly, to upwards of 60 per cent. Missing the spectacular rally in mid-cap stocks, the fund has lagged its peers in performance over the past two years. However, it ranks in the top quartile over the long run.

Also, given the present iffy market, the fund’s far higher exposure to large-cap stocks when compared to peers lends comfort. The fund has kept its exposure to large-caps at 88-90 per cent over the past year.

Value picks

Going by its mandate, the fund has also made some good value picks over the past couple of years that have paid off well. Balkrishna Industries and Bajaj Finserv are a case in point.

There are some bets, however, that failed to deliver. Picks in the pharma and IT space, for instance, have dragged the fund’s performance in the last two years. A few private and public bank stocks too have impacted the fund’s performance over the past one to three years.

The fund currently has 15.7 per cent exposure to banking, which is the top preferred sector. Barring SBI, the fund’s portfolio consists mainly of private bank stocks. The recent bank recap plan announced by the Centre has led to a spectacular run in PSU bank stocks.

While the fund has minimal exposure to PSU bank stocks, the Centre’s plan is likely to have a positive rub-off on the sector as a whole.

Software and pharma are the fund’s other top sector choices. While the headwinds in these sectors are far from over, these stocks could be good value picks in the long run.

Risk mitigation

While the fund’s portfolio is diffused with a little over 40 stocks, it carries some concentrated bets such as L&T, HDFC Bank and Sun Pharmaceutical Industries at 7-9 per cent of portfolio. Considering that these are companies with sound fundamentals and dominant presence in their sector, the risk is mitigated to a large extent.

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