DSPBR Equity - HOLD

DSPBR Equity, a multi-cap fund, has been an underperformer in recent times. It has failed to beat both its benchmark, CNX 500, and peers, such as Franklin Flexicap, Birla Sun Life Equity and HDFC Capital Builder, over one- and three-year timeframes. Even over a five-year timeframe, the fund has just about managed to outdo the benchmark’s returns of 16 per cent.

Considering its moderate performance, fresh exposures need not be taken in the fund right now. But existing investors can continue to hold on to the units of the scheme, in the light of its ability to do well during rallies and its reasonable long-term track record.

Average performer

DSPBR Equity generally holds 30-40 per cent of its equity exposures in mid- and small-cap stocks. Exposure to stocks in the category that took quite a beating since the beginning of this year and the paring of holdings in the pharma space, which has been doing well, are among the key reasons for its underperformance in the last one year.

But the fund fared well enough in 2012, which was marked by a mid-cap rally. Well-timed increases in mid-cap holdings, along with right choice of stocksm such as ING Vysya Bank, Godrej Industries, Emami, Tata Global Beverages, Jubilant FoodWorks, Apollo Tyres and Bata India, helped.

The fund displays a consistent ability to beat its benchmark in rallies and contain losses better in downturns, making timely moves in and out of debt/cash calls.

However, the level of outperformance is not wide. Hence, it will suit investors looking for moderate returns.

The 30-40 per cent mid-cap exposure pegs up the risk a bit. Secondly, in the last five years, the scheme beat its benchmark only 63 per cent of the time. This makes the timing of the investment important.

But the fund rewards investors handsomely over the long term. It has clocked 20.8 per cent returns in 10 years (dividend option), and finds a place among the top 10 diversified equity funds during this period.

Portfolio and strategy

The fund has never been high on the high-performing consumer non-durable stocks in the last few years, with holdings below 10 per cent in the space. This might have been a contributing factor to its poor show so far. But it puts the fund in a sweet spot now, with valuations in this space moving high up. It has also done well to gradually trim its banking exposure this year, but has increased holdings from 12 per cent to 18 per cent in October, to benefit from strong performers among private banks. Axis Bank is a new entrant while stakes have been raised in ICICI Bank, ING Vysya and Karur Vysya Bank. Holdings in software stocks have been upped since August.

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