ICICI Pru Focused Bluechip Equity: Invest ::Business Line

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If you are an investor looking for a large-cap portfolio, ICICI Pru Focused Bluechip Equity is a good option. The fund has delivered robust returns since its inception in May 2008 and bettered its benchmark S&P CNX Nifty across market rallies and declines.

Over a three-year period, the fund delivered compounded annual return of 33 per cent and outperformed its benchmark by nine percentage points. Its performance over one-, two- and three-year periods places it among the top five in the large-cap fund space.

During volatile phases in 2011, the fund managed to retain its position by effectively containing downside, despite sharp falls in many large-cap stocks.

The fund focuses mainly on Nifty stocks, while taking exposure to a few stocks outside this basket.

The average market capitalisation of its portfolio is over Rs 72,000 crore, far higher than that of Franklin India Bluechip Fund and HDFC Top 200.

This implies that the fund invests mainly in stocks of highly liquid and true blue-chip companies.

The price earning multiple of the portfolio, at 16.9 times, also suggests that the fund goes for relative value picks (compared with the Nifty basket) in the large-cap space. This may also be one reason for its less volatile performance. But that also means that the fund's return through the SIP route will not be too high compared with lump sum. This is because its NAV would swing much less, thus providing limited scope for rupee cost averaging. However, SIP will still remain an optimal vehicle for long-term wealth builders.

The fund's consistency appears to be well-acknowledged by investors as its assets expanded 78 per cent to Rs 3,532 crore over the last one year.

PERFORMANCE

The fund delivered 8 per cent last year as against less than one per cent clocked by its benchmark as well as consistent performer HDFC Top 200. Although the fund bettered its benchmark, its over-dependence on banking stocks may be a concern.

From January 2012, the fund is being managed by Mr Manish Gunwani. Investors need to watch the performance, post this change, over the next few quarters.

PORTFOLIO STRATEGY

The fund holds 24 stocks and the top three sectors account for 46 per cent of the assets.

Although the fund invests in large-cap stocks, its portfolio turnover suggests that the fund actively manages its stocks. For instance, the fund pruned its exposure to the auto sector once the rally tapered off. From a high of 12.3 per cent last year its exposure reduced to 5.6 per cent in the January 2012 portfolio.

Over the same period, exposure to pharma increased from 1.8 per cent to 8.5 per cent.

Although the petroleum major Reliance Industries struggled to expand earnings, the fund doubled its exposure to this stock in the last six months. The fund uses derivatives to hedge some of its stocks. This also forces it to hold higher cash at times.