Investors looking for a large-cap addition to their portfolios can buy units of DSPBR Top 100 Equity. The stocks in which the fund invests have a market capitalisation of over Rs 10,000 crore.

The fund has a steady track record of beating its benchmark, BSE-100. This, together with the fund’s ability to contain losses very well when markets plunge, makes it a safe bet, especially in the current volatile environment. The fund has outperformed peers such as UTI Top 100 and Principal Large Cap over the longer term.

Performance

Some of this underperformance may be attributable to the recent dip in DSP Top 100’s returns.

Over a three- and five-year period, the fund has delivered a return of 7 and 9 per cent, respectively, beating its benchmark by a comfortable margin of three-five percentage points.

In the recent 2011 downswing, the fund lost 20 per cent, compared with the steeper 26 per cent slide in the BSE-100.

On a five-year daily rolling return basis, the fund has beaten its benchmark over 80 per cent of the time.

It has slipped up only of late, owing to recent bets on stocks such as Reliance Industries, BHEL and Hindustan Unilever which haven’t done well in the recent past. On a one-year basis, the fund has clocked a 7 per cent return against its benchmark’s 10 per cent.

Portfolio

But these bets could well turn out to be correct calls, with deregulation rules benefiting the oil sector and potential pick-up in the investment cycle. Besides refineries and capital goods, the fund has exposure in related sectors such as infrastructure and base metals. Derivative calls on the Nifty are taken. The fund actively juggles exposure to both sectors and stocks, and has usually got these calls right. It has maintained holdings only in banks, which it heavily added in early 2009.

The fund has moved in and out of sectors such as auto, oil & gas, power, infrastructure, FMCG and software. Owing to regular churn of sectors and stocks, the top holdings are rarely steady.

For instance, banks, autos and software made up the top three sectors in November 2012 with a combined holding of 52 per cent.

By January 2013, a significant addition to refineries pushed it to second place in the top three sectors.

Similarly, pharmaceutical stocks were among the top holdings during the bear phase of 2008-09 at about 10 per cent. The fund retained exposure at more or less the same levels until mid-2012, when it slowly cut holdings to less than 3 per cent.

On an average, the fund exits about five to seven stocks a month, while entering a similar number.

The churn suggests that the fund buys stocks with a specific target in mind. Such a churn is beneficial since it allows the fund to make the most of stock momentum.

(This article was published on March 9, 2013)
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