ICICI Prudential Dynamic Plan: Invest :: Business Line

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In these times of extreme volatility, ICICI Prudential stands out for three distinct abilities - to shuttle between debt and equity, consistent returns and contain losses.

While the fund primarily invests in equity, its mandate allows it to move to safer debt options, should the equity market conditions call for it.

In equities, the fund invests across market capitalisations, though stable blue-chips form the majority of the portfolio.

While mid-cap stocks (those with a market capitalisation of less than Rs 7,500 crore) may be riskier, the fund veers towards quality picks, such as Jagran Prakashan, Sadbhav Engineering, MindTree and Balkrishna Industries. Its July 2013 portfolio had an average price-earnings multiple of a reasonable 12.2 times, against 15 times of the CNX 500 and the Nifty.

Over the past ten years, the fund has delivered a compounded annual return of 22 per cent against its benchmark Nifty and CNX 500’s 15 and 14 per cent, respectively. Investors wishing to contain volatility in their portfolios and who have a long-term horizon can invest in the fund.

CONSISTENT PERFORMER

Over one-, three- and five-year timeframes, the fund beat its benchmark Nifty by a comfortable margin of 3-5 percentage points. In terms of performance, it ranks in the top quartile of funds that invest across capitalisations.

It has also proved resilient at containing losses - in the two previous market down cycles, the scheme lost about five to six percentage points less than its benchmark. In the yo-yoing market of the past five years, the fund has done better than the Nifty a good 80 per cent of the time on a yearly rolling return basis, indicating good consistency in returns.

STRATEGY

The fund puts its flexible mandate to good use, shifting out of equities just before market peaks. Towards end-2010, for instance, when the prolonged rally was beginning to taper off, equity exposure was at a low 72 per cent. Similarly, equity exposure fluctuated between 70 to 80 per cent for much of the 2008-09 bear market.

The fund’s July portfolio has 88 per cent in equities. The portfolio is biased towards large-cap stocks (those with a market capitalisation above Rs 7,500). Over the past five years, the share of mid- and small-cap stocks has been 10-20 per cent of the portfolio.

Banking has been the top holding for most of the past three years. Still, with the current rout of the banking space, the share of this sector has been pruned over the past six months to 16 per cent now. It built up software and telecom holdings over 2011 and 2012, which holds it in good stead now. Other timely sector calls include reducing automobiles from late 2012 while adding oil and gas stocks.