Birla Sun Life Frontline Equity: Invest

Suresh Parthasarathy | Updated on November 12, 2011


iw13 spot1 birla sun life.eps

Birla Sun Life Frontline Equity may be a good investment option in a highly volatile market such as the current one. With its large-cap bias, the fund proved its ability to better its benchmark and category average across market cycles.

Although during market rallies, the fund outpaced its benchmark BSE-200 by just a few percentage points, it proved its grit in containing losses well during the market corrections by falling lesser than the benchmark. During the 2008 market correction for instance, it declined 8 percentage points lesser than BSE-200.

The fund, over three- and five-year periods clocked compounded annualised return of 23.6 per cent and 11.5 per cent respectively and outpaced its benchmark by close to 5 percentage points. Although the fund predominantly focussed on large-cap stocks with market capitalisation above Rs 7,500 crore, it branched out into mid- and small-cap stocks as well. Despite its exposure to such stocks, the fund was not subject to high volatility. To this extent, its SIP returns are not necessarily superior to a lumpsum investment. SIP works better when NAVs go through their highs and lows more often. In this case, the fund's five-year SIP returns are lower than lumpsum returns.

Performance: In the past one year, the fund's NAV lost 15.3 per cent of its value against an 18.8 per cent dip in the BSE 200.However, over the same period, large-cap peer Franklin India Bluechip contained losses better, falling only 9.6 per cent. Birla Frontline lost higher value due to its strategy of mimicking the sector weights of its benchmark.

Despite its scaled down exposure to banking stocks, steep correction in the finance sector impacted its performance as the sector accounted for more than 20 per cent of its portfolio. However, the fund topped the list of large-cap funds benchmarked against the BSE-200, over the last three- and six month periods as well as over a one-year time-frame. Despite a volatile market, the fund continues to witness inflows. It has, however, retained a little under 10 per cent in cash and cash equivalents. Its exposure to stock futures and bank index futures could have also promoted the fund to hold cash in the portfolio.

Portfolio Overview: In its October portfolio, the fund held 56 stocks.

Exposure to individual stocks was less than 5 per cent of the portfolio.

This could reduce the risk profile. The top three sectors — finance, software and petroleum accounted for 38 per cent of the assets.

Mid- and small-cap stocks accounted for less than seven per cent of the portfolio. The interest rate sensitive auto and auto ancillaries sectors made up 7 per cent of the portfolio. The fund is managed by Mr Mahesh Patil.

Published on November 12, 2011

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor