The Hindu Business Line : Large-caps most likely to stage comeback and save funds

Kolkata, Aug. 17 Large-cap stocks, many of them hurt badly on a day (Thursday) the Sensex went down by over 600 points, may yet save the day for equity funds.

Or so feel fund houses, ones that believe that these counters will be among the first to recover if and when the current declining trend gets arrested.

Large-caps, which in many cases contribute critically to portfolios, have generally figured among the worst affected stocks of the day.

The decline is most apparent in stocks such as Tata Steel, Bharti, SBI, Reliance and Reliance Communications – all of which are held widely in the universe of equity funds.

Super-large caps, as a look at the latest portfolio statements reveals, account for 45-55 per cent of the assets in a number of portfolios.

Some of the most prominent instances, a review by distribution firm Plexus Management shows, are Franklin India Bluechip (50 per cent), ICICI Prudential Growth (54 per cent), UTI Master Growth (56 per cent) and HSBC Equity (52 per cent).

In quite a few other cases, such as newcomer AIG India Equity, these are in the range of 40-45 per cent.

Stocks in the same league as Tata Steel contribute significantly to the Sensex and Nifty, which both lost over four per cent on Thursday.

Considering the top-turnover stocks on just the NSE, six out of the first 10 names lost over five per cent.

“Large-caps are more likely to stage a comeback, perhaps sooner than the stocks in some of the other segments. We have seen this happening so many times before,” said Mr Prasunjit Mukherjee, who heads Plexus, with reference to the latest scenario.

Mr Sanjay Sinha, CIO of SBI MF, pointed out that large-caps are extremely liquid in nature as the volumes reveal. They should be among the first to stage a comeback, he said.

A number of equity funds have considerable cash in their portfolios as well.

Statistics pertaining to July-end point to 12-22 per cent cash in Birla Sun Life Equity (13 per cent), Escorts Growth (21 per cent), Reliance Equity (15 per cent), DBS Chola Global Advantage (19 per cent) and Magnum Global (15 per cent). There are other examples too. A few thematic funds also carried large cash holdings.

However, fund houses are generally not keen on holding cash for very long periods.

Mr R. Rajagopal of DBS Cholamandalam MF said that cash may at best be a temporary strategy for active fund management.

“There is every reason to stay invested. Deploying sizeable doses of cash efficiently and over a short span of time may prove difficult.”

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