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Prudential ICICI Growth: Sell

S. Vaidya Nathan

INVESTORS in Prudential ICICI Growth Plan may cut exposures, as the fund continues to lag its peers; this is despite an improvement in performance over the past few months.

The latter may be used as an opportunity to exit the fund at the present higher levels of the market.

Over three- and five-year periods, the fund's performance has been rather unimpressive.

Prudential ICICI Growth has outpaced the Nifty, its benchmark. But a host of diversified funds have done much better.

The fund invests in large-cap stocks and is aggressively managed. With a high churn of its portfolio, the fund should have been able to outpace the Nifty by bigger margins, especially in bullish phases, when actively managed funds usually notch up smart numbers.

This represents continuity in our stance, as we had placed a `sell' on the fund in May.

Investors could contemplate switching to funds such as HDFC Equity, HDFC Top 200, Magnum Contra, Reliance Growth and Franklin Prima, which offer attractive risk-adjusted returns.

Investors who are willing to wait for a three-year period could also consider Morgan Stanley Growth Fund, which has a performance similar to PruICICI Growth; the discount of 18 per cent at which the fund trades to the NAV will sizeably scale up returns.

Prudential ICICI Growth has also faced sizeable outflows, as its asset base has declined by about 50 per cent over the past 18 months.

It now has an asset base of about Rs 266 crore.

Portfolio overview: The preferred sectors now are IT, banking and pharmaceuticals though they account for less than 30 per cent of assets.

The fund has invested in frontline stocks across sectors and kept stock weights at less than 5 per cent.

A few mid-cap stocks such as Bannari Amman Sugars, Gujarat Industries Power, Kesoram Industries, Jaiprakash Associates and Gujarat State Fertilisers also figure in the portfolio.

The presence of such stocks, and an asset base that has remained at about Rs 250 crore for much of this year and should have offered flexibility in fund management, but have not helped it turn in a superior performance.

Fund facts: Prudential ICICI Growth was launched in February 1998.

The minimum investment amount is Rs 5,000.

There is no exit load. Mr Deven Sangoi is the fund manager.

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