Mutual Funds

Plays it safe with large-cap tilt

K Venkatasubramanian | Updated on January 24, 2018 Published on February 07, 2015

It may not be a chart topper but gives steady returns in the long run



If you seek the safety of large-caps in volatile markets but also wish to gain from broader rallies, then ICICI Pru Top 200 is a suitable option for the long term. Investors looking for steady returns and outperformance over the benchmark can consider buying the units of the scheme. It has a multi-cap flavour, though the tilt is towards large-cap stocks.

The fund invests in stocks from the BSE 200 (its benchmark) universe. But a good portion of the scheme is made up of stocks from the Nifty basket. Over one-, three- and five-year time frames, the fund has outperformed the BSE 200, to the tune of 4-5 percentage points.

Across timelines, the scheme has also done better than its category’s average. In the last five years, ICICI Pru Top 200 delivered compounded annual returns of 16.4 per cent. In the last three years, the fund’s 25.7 per cent annual returns are better than the likes of Canara Robeco Equity Diversified, Religare Invesco Equity and DSPBR Opportunities.

The scheme has managed to contain downsides slightly better than its benchmark during falls while ensuring reasonable participation during rallies, making it a safe bet.

It may not be a chart topper, but ensures stable performance over the long term of five-seven years. Investors with a moderate risk appetite may consider ICICI Pru Top 200 as a diversifier to the portfolio.

Investments can be considered in the fund through the SIP (systematic investment plan) route to average the costs and ride out volatility in the markets.

The fund generally maintains a certain level of cash and debt across market cycles, which can go up to the extent of 9 per cent as seen from its recent holdings. The debt levels in the portfolio are typically increased during volatile markets.

Portfolio and strategy

Banks and software had remained its top segment picks over the past few years. But in the last one year, it has substantially trimmed stakes in software, while increasing exposure to cyclical segments such as autos and ancillaries. Pharma and consumer non-durables have seen significant reduction in allocation. In the initial phase of the rally, the fund raised stakes in the construction sector, but pruned it later on.

ICICI Pru Top 200 invests up to 60 per cent of its portfolio in large-cap stocks. Its exposure to mid-caps has increased in the last one year to around 30 per cent of its assets.

Exposure is restricted to quality names such as TVS Motor, Bajaj Finserv, Balkrishna Industries and V-Guard Industries. The common blue-chip names such as HDFC Bank, Dr Reddy’s Labs, Infosys, Maruti Suzuki and L&T too figure prominently. The fund does churn its portfolio quite heavily, which may increase the expense ratio.

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