The Hindu Business Line : DSP ML Top 100 Equity Fund: Buy

The sweeping correction in stock prices has seen the BSE Sensex and the BSE 500 shed about 29 per cent and 35 per cent from their respective peak values till date. For investors seeking to build or to augment their equity portfolio, this may be a good time to acquire or add exposure to a basket of frontline stocks. The DSP ML Top 100 Equity Fund appears to be a good option for such investors. The fund’s portfolio is drawn from India’s top 100 companies by market capitalisation.

The fund’s annualised returns of 48 per cent over the past five years (against 44 per cent for the peer group), its consistent show across market cycles and ability to weather market declines well, make out a strong case for investment.

An investment in DSP ML Top 100 Fund would give one a focused exposure to the frontline stocks of India Inc. The fund’s portfolio was entirely invested in stocks with a market capitalisation of Rs 9,000 crore or more as of February.

This large-cap focus has been consistently maintained in the past few years. Under current market conditions, a portfolio of large-cap stocks may carry a lower risk of erosion when compared to one with a mid-or small-cap tilt. Mid/small-caps may be more vulnerable to unwinding by institutional investors or pullouts triggered by global cues; smaller companies also carry a higher risk of earnings disappointments. Any recovery driven by FIIs may also see large-cap stocks leading from the front.

With 1, 3 and 5-year returns (compounded) of 28, 35 and 48 per cent respectively, DSP ML Top 100 Equity has outpaced both its benchmark (BSE 100) and its peer group convincingly. The fund is among just a handful to contain the decline in its NAV to a level below that of the Sensex, during the recent meltdown.

While this can be attributed to significant cash levels in the portfolio, it bears mention that this fund has weathered every one of the past four corrective phases in the market, between May 2006 and January 2008, well. Energy, financial services and technology were the fund’s top sector preferences in February. The fund’s NAV was Rs.68.65 per unit for the Growth option on March 19.

Aarati Krishnan

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