The Hindu Business Line : PruICICI Power: Hold

PRUICICI Power has been a consistent middle-of-the-road performer in the equity funds' category. As the returns compare well to most diversified funds, investors can retain their units in the fund. However, if this is the only item in your portfolio, it may be better to diversify into funds with a better track record, such as the PruICICI Tax Plan (if you don't mind a three-year lock in period) or HDFC Top 200 Fund.

Though the name suggests a thematic approach, PruICICI Power may actually be better suited to fairly conservative investors who invest in diversified funds. Despite its name, the portfolio does not concentrate on any specific theme, though infrastructure and energy-related stocks do find a sizeable representation in the portfolio.

As of November, for instance, industrial capital goods and banks were the top sector exposures, but there were also significant exposures in FMCGs, pharmaceutical and software. Nor does the fund concentrate on sectors the way other thematic funds do. The top three sectors typically account for about 30 per cent of the assets, which is usual for diversified funds.

In terms of stock choices, the fund appears to have gone largely by valuations. In industrial capital goods, for instance, the fund has opted for L&T, BHEL and Thermax rather than high-P/E "growth" plays such as Siemens or ABB.

The portfolio features a sizeable allocation to oil and gas stocks such as Reliance, BPCL and IOC; the last two are not on the radar screens of most equity funds now. The average price earnings multiple for the portfolio was 16 times by end-November, in line with the broad market valuation. Both the sector and stock choices suggest that the fund follows a fairly low-risk approach to investing.

In terms of performance, PruICICI Power has been a consistent, but not top-of-the-line, performer. On a one-year and three-year basis, the fund's returns beat the category average for diversified equity funds by a small margin.

The performance compares quite well with the benchmark.

The fund continues to figure in the top quartile in a ranking of equity funds based on their five-year return record.

An investment made in this fund at inception would earn a compounded annual return of 16 per cent till date; the returns would be 31 per cent for a five-year period.

Fund facts: PruICICI Power was launched in 1994 as a close-end product and later converted into an open-end fund. The fund manages about Rs 728 crore. The fund manager is Mr Anil Sarin. The fund benchmarks itself to the CNX Nifty.

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