The Hindu Business Line : PruICICI Emerging S.T.A.R: Hold

INVESTORS can retain their holdings in Prudential ICICI Emerging S.T.A.R Fund. The fund, which is focussed on mid-cap stocks, was launched last October. Since then, it has delivered an impressive return of more than 50 per cent. The fund's performance over a three-month and six-month period has also been strong.

Its performance has significantly outpaced that of its benchmark, the Junior Nifty. But this is to be expected, as the index is dominated by several large-cap stocks. The CNX Midcap 200, on the other hand, has delivered about 60 per cent over this period, beating the fund's performance.

With the sharp run-up in prices of mid-cap stocks, the valuation levels of stocks in its portfolio appear stretched. Fresh exposures may, therefore, be avoided. Its performance would also have to be evaluated over a longer time-frame. For an investor looking to boost their returns through mid-caps, funds with a long-term track record such as Franklin Prima may be considered.

Suitability: The fund invests predominantly in mid-cap stocks, which it defines as stocks with a market capitalisation ranging between Rs 100 crore and Rs 2,000 crore. As mid-cap stocks tend to be relatively less liquid and volatile, the fund has a higher risk profile than a typical diversified fund.

Portfolio overview: The software sector is the preferred exposure, accounting for about 20 per cent of total assets. Holdings within the sector are, however, spread over a couple of stocks. The auto ancillaries and capital goods sectors are the other significant holdings.

There are about 45 stocks in the portfolio. The top ten holdings account for 38 per cent of the assets. I-flex Solutions is the fund's top holding and is the prominent large-cap stock. Several small-cap stocks, such as Ucal Fuel, Orient Paper, Ramco Industries, Bata, Mahindra Gesco and Shanthi Gears, figure prominently in the portfolio.

About 40 per cent of the assets are invested in stocks with a market-cap of less than Rs 750 crore.

On an average, stocks trade at a price-earnings multiple of 21 times. The portfolio is aggressively churned.

Fund facts: PruICICI Emerging S.T.A.R has an asset base of Rs 165 crore. The minimum investment amount is Rs 5,000. The fund offers dividend and growth options.

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