Mutual Funds

ICICI Pru Focused Bluechip Equity: Invest

Updated on: May 21, 2011
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Investors can buy the units of ICICI Pru Focused Bluechip Equity fund (ICICI Focused), given its robust performance over the past three years. The fund was launched in May 2008 and has since outperformed its benchmark – Nifty, over these years consistently.

Since its inception, the fund has managed a compounded annual return of 17 percent, which places it among the top few funds in its category. It has also outpaced such funds as Franklin Bluechip, Birla Sun Life Frontline Equity and managed to close the gap with the likes of HDFC Top 200.

ICICI Focused sticks to investing in blue-chip stocks, largely from the Nifty basket. In the present volatile market environment, a focus on large-cap stocks may suite investors with low risk appetite. However, this fund would be an option next only to the consistently stellar performer HDFC Top 200. ICICI Focussed had the advantage of being launched after the market correction started, thus providing it with an opportunity to build a portfolio during market lows.

Whether in the market correction of 2008-09 or the subsequent rally from March 2009 till much of 2010 and even in a sideways market witnessed over the past six months, ICICI Focused has contained downsides and outperformed its benchmark. But the fund still has a short track record to go by and hence investors can choose to take the SIP (systematic investment plan) route to investing in the scheme.

Portfolio and strategy : During the heavy market fall in 2008, the fund took a cautious approach to prevent downsides. ICICI Focused took cash and derivative positions of over 25 per cent during months characterised by heavy volatility and large falls in indices. The fund also often has exposure to Nifty Index futures to the tune of over 5 per cent. But the fund was able to quickly deploy cash back into equity from March-April 2009 itself, which enabled sound participation in the subsequent rally.

ICICI Focused has switched sectors well, choosing the ones with the right momentum behind them. Quite early on, the fund took heavy exposure to sectors such as banks, software and automobiles which have been outperformers over the last couple of years, and was thus able to fully benefit from the upward trend in these segments. The oil and petroleum products sector has consistently figured prominently in the portfolio, with policy reforms on pricing helping these stocks. This sector, together with consumer non-durables, provided a reasonable cushion against market volatility.

Interestingly, the fund also had telecom as its top sector through 2008 and early part of 2009. Stocks from these sectors acted as defensives during market falls and outperformed till mid-2009. But with new operators coming in and the tariff wars eroding margins, the fund quickly reduced exposure substantially.

ICICI Focused has a compact portfolio with around 20 stocks generally featuring in it. Over the last several months, the fund has reduced concentration to individual stocks to 5-7 per cent, from 8-10 per cent in 2009 and 2010, suggesting that the fund could be reducing its risk profile.

Published on May 21, 2011

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