BNP Paribas Equity Fund: Invest :: Business Line

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BNP Paribas Equity fund may not top the performance charts but has delivered steady returns above benchmark across time-frames.

Investments are primarily made in large-cap stocks (those with market capitalisation of over Rs 7,500 crore), which makes it a safer bet in the ongoing volatile market.

While the fund does include a portion of mid-cap and small-cap companies in its portfolio, these are usually those with sound fundamentals or reasonable valuations such as Balkrishna Industries, Sadbhav Engineering, VA Tech Wabag, or Puravankara Projects. The fund also takes debt exposures from time to time. Conservative investors can buy units of the fund in small amounts.

STEADY PERFORMANCE

Over one-, three- and five-year time-frames, the fund has beaten its benchmark Nitfy by a margin of 2 to 4 percentage points.

Given that the portfolio is a larger basket of stocks than the Nifty, the fund has also beaten the broader CNX 500 by a good 3 to 6 percentage points.

Though the fund did fare badly during the 2008-09 slowdown, losing more than its benchmark, performance picked up after that. In the 2011 market downturn, the fund contained losses to 19 per cent against the 26 per cent loss in the Nifty.

The fund has also done better compared with other large-cap oriented funds such as ICICI Top 200 and UTI Top 100.

PORTFOLIO CHURN

The equity allocation in the portfolio is usually around 90-93 per cent with the remaining in corporate debt instruments, CBLO holdings, and cash. Stocks in the portfolio number around 40, with a large variety of sectors.

Banks and financial services have formed the top holding for past three years. Stock picks in this sector include stalwart performers ICICI Bank and HDFC Bank besides smaller plays such as IndusInd Bank and Repco Home Finance. Other sector regulars are pharmaceuticals, software and telecom. The top four sectors account for over 40 per cent of the portfolio. High holdings in sectors such as power, capital goods and infrastructure and a slow exit from these hampered fund returns earlier. But over the past three years, sector picks have been prudent.

Towards the latter half of 2012, the fund began to add stocks in the tyre space with picks such as Balkrishna Industries zooming. Other timely calls included auto ancillaries and cement in 2012, automobiles, FMCG and pharmaceuticals in 2011 and metals in 2009-10. The fund has recently stocked up on energy and power companies, which could turn out to be good picks with the reforms in the sectors. Churn of sectors and stocks is also fairly frequent. In ITC, for instance, the fund has frequently booked out and picked up. Sectors such as paints, alcohol, entertainment, realty and gas have also flitted in and out of the portfolio.