The Hindu Business Line : ICICI Prudential Dynamic Plan: Hold

Investors can hold the units of ICICI Pru Dynamic Plan (ICICI Dynamic) given the fund’s ability to contain downsides and provide steady returns during market rallies. The fund has over one-, three- and five-year periods, bettered the returns of its benchmark — the S&P CNX Nifty.

ICICI Dynamic may not deliver top-of-the line returns during bull-runs, but may contain downsides reasonably. The fund may thus be suitable for investors with moderate risk-return expectations.

The fund has a mandate that allows it to straddle large- and mid-cap stocks as well as to move to cash/debt positions, even to the extent of 100 per cent of the portfolio.

Over a five-year period, the fund has given compounded annual returns of 18.6 per cent, which places it among the top quartile in the diversified funds performance chart.

Performance and suitability: ICICI Dynamic has managed steady rather than spectacular returns during bull runs as well as market corrections in 2007 and now. With a mandate that allows it to invest in stocks across market caps, the fund invests significantly in mid-cap stocks (less than Rs 7,000 crore market cap).

Over the past year or so, ICICI Dynamic invested over 30 per cent of the portfolio in such stocks. But it was not able to derive the full benefits of mid-cap stocks rally last year, possibly because of the rather high debt position in the portfolio.

Its recent portfolios, however, have seen considerable reduction in the debt which, in the October portfolio, is under 4 per cent. Over the last few months ICICI Dynamic invested over 15 per cent of its portfolio in derivatives. While exposure to derivatives could be viewed as a hedging strategy, a shift from debt holding to the former instrument could suggest some change in the fund’s risk profile. Investors may have to be watch for any continuation of this trend in the coming quarters.

A large-cap bias may, however, better serve the fund in the current environment as such stocks may have better revenue visibility and relatively lower volatility, resulting in quicker recovery in a market upturn.

Portfolio: ICICI Dynamic Fund has a fairly defensive over to the sectors it invests in. Over the past year, pharmaceuticals — a sector that is seemingly less volatile in the current environment — continues to be one of the top two sectors held. The fund held high exposure to this sector even a year ago.

Software and banks are also among the key sectors held by the fund, possibly due to their relatively beaten down valuations. The fund held over 40 stocks with its recent portfolio indicating exposure to 46 stocks across 21 sectors, making it fairly diversified.

Fund Facts: The NAV per unit of the growth option is Rs 45.6. Mr Sankaran Naren manages the fund.

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