Mutual Funds

IDFC Sterling Value: Short-term hiccups, long-term gains

K Venkatasubramanian | Updated on November 29, 2018 Published on November 25, 2018

The fund has delivered solid compound annual returns of 18.1% in the past 5 years

Investors with a moderate risk appetite looking for steady long-term returns, and with the ability to digest short-term underperformance, can buy the units of IDFC Sterling Value (earlier called IDFC Sterling Equity). The fund is predominantly mid-cap-oriented, with a small proportion accounting for large-cap stocks, which are thrown in for greater portfolio stability.

Over three-, five- and 10-year time-frames, IDFC Sterling has outperformed its benchmark — BSE 500 TRI. The fund manages to do better than its benchmark by 3-4 percentage points over very long time periods. As with funds across equity categories, it lags behind the BSE 500 TRI over the one-year period, given the heavy carnage in the mid-cap universe.

In the past five years, the scheme has delivered solid compound annual returns of 18.1 per cent. IDFC Sterling is not entirely a value play fund — it is not averse to buying growth or momentum stocks — though a good portion of its picks falls under the category.

As indicated earlier, there could be short periods of lackadaisical performance, but over a 5-7-year time-frame, the scheme clearly compensates with above-average returns without taking major risks. IDFC Sterling will be suitable for investors with a medium risk appetite. Buying units of the fund through the SIP route is advisable, as that will ensure optimal cost averaging.

Portfolio and strategy

The fund maintains a fairly diffused portfolio spread across more than 70 stocks at any point in time. Exposure to individual stocks is almost always less than 5 per cent.

The weightage to specific segments is kept to around 10 per cent. The portfolio is, thus, well-diversified and low on risks.

Mid-cap stocks account for 70-75 per cent of IDFC Sterling Value’s holdings, while large-caps make up 10-20 per cent. The fund holds cash positions of 5-7 per cent across market cycles to contain downsides.

Auto ancillaries have been the fund’s favourite over the past 3-4 years and have been among the top holdings. IDFC Sterling identified value bets in sectors such as cement, retail and private sector banks early on and benefited from the rally in the segments over 2015-17.


Not buying into the IT sector, which has had a great run over the past year, and staying with a few public sector banks (PSBs) for too long hurt the fund’s performance over the past year. IDFC Sterling has since pared exposure, or sold, most PSBs, and moved to safer bets such as RBL Bank and IndusInd Bank. Some of the top holdings of the fund include Voltas, Future Retail, IndusInd Bank, The Ramco Cements and KEC International.

The scheme may not be a chartbuster, but delivers steady returns if held for longer time-frames, by beating its benchmark convincingly.

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