IDFC Focused Equity: On a steady comeback trail

The fund has moved up the pecking order with its superior one-year show

Investors with a long-term perspective looking for a multi-cap fund could consider buying the units of IDFC Focused Equity. Although the fund was an underperformer in markets rallies, it has witnessed turnaround recently.

Over the last one year, the fund has delivered an extraordinary return of 56.7 per cent against its benchmark Nifty 50’s return of 29.5 per cent and the category average return of 38.3 per cent. The fund has also outperformed its benchmark over three and five-year periods by delivering gains of 14.5 and 15.5 per cent, respectively.

As the name suggests, IDFC Focused Equity is a compact portfolio, which invests up to 30 stocks across market caps. With the equity markets scaling new highs in recent times, investing in multi-cap funds like IDFC Focused Equity can help as they invest across market caps and sectors.

Interestingly, the fund has outperformed its peers such as Motilal Oswal Most Focused Multicap 35 and Axis Focused 25 over the past one year period. In this period, the fund has also beaten the multi-cap veteran funds, namely ICICI Pru Value Discovery and Reliance Equity Opportunities. Investors could do systematic investment plan (SIP) in IDFC Focused Equity to mitigate their risk.

The fund had contained the downside well during the 2008 and 2011 market correction. After being a mid-quartile fund for many years, the fund has moved up in the pecking order, to the top quartile with its superior one-year performance.

Currently, the fund is fully invested in equities, however, it does take active call on cash and debt. For instance, the fund reduced its equity exposure and increased its cash debt allocation during market correction in second half of 2016. The fund has a small exposure to foreign equities, Cognizant Technology Solutions Corp.

IDFC Focused Equity mainly invests in growth oriented companies with better quality. It also looks at stocks that have the potential to turn around and leverage on growth opportunities.



Sector choices



The fund invests about 35 per cent of its asset in banking and finance sectors. It is also bullish on consumer discretionary. About 11 per cent of the allocation is towards automobiles and auto ancillary sectors which have worked out well. For instance, the fund’s top holding Maruti Suzuki India stock has delivered astonishing gains and continues to grow. Titan Company is another stock that has given good gains. The fund being underweight on technology has paid off.

Recently, the fund entered sectors such as petroleum products, media & entertainment and consumer non-durables. Also, it has doubled its allocation to petroleum products. It exited hotel and retailing.

It has added stocks such as HDFC Standard Life Insurance Company, Zee Entertainment Enterprises and Jubilant Foodworks to its portfolio and exited AU Small Finance Bank and Avenue Supermarts.

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