IDFC Equity: Invest

Investors looking for a fund with moderate risks and returns in line with the benchmark can opt for IDFC Equity.

The scheme, which invests only in large-cap stocks, has delivered steady returns over the past few years. By containing the downsides and ensuring reasonable participation during rallies, IDFC Equity has managed to ride out market cycles.

Over one-, three- and five-year timeframes, the scheme has beaten its benchmark - Nifty, though by just about 1-1.5 percentage points. In the last five years, the fund’s returns of 16.3 per cent place it in the mid-quartile of schemes in its category. It has generally done better than the category average as well.

Although valuations in the large-cap stocks space have risen substantially over the past couple of years, they still remain the preferred avenue given the market volatility as also due to the fact that such companies continue to have considerable earnings visibility.

When the markets went into a tailspin in 2008 and in 2011, the fund did well to contain downsides better than its benchmark. It also ensured participation in the subsequent rallies to just about the extent of its benchmark.

IDFC Equity may be suitable for investors with a low-to-medium appetite for risk and those with a long-term investment horizon of five-seven years.

Investors can buy units of the fund as a diversifier to their portfolio. Small sums can be parked in the fund to derive reasonable returns.

Portfolio and strategy IDFC Equity picks almost all the stocks in the portfolio only from the Nifty basket. It generally maintains a compact portfolio of less than 30 stocks most of the time. A certain degree of value orientation is seen in the way the fund churns its sectors and juggles its stocks.

Banks have always remained the top holding for the fund. The fund also had consumer non-durables as a key sector when it was rallying but reduced exposure over the past one year as valuations heated up. It began to increase exposure to the software sector over the past one year, where valuations were and continue to be reasonable.

Holdings in construction stocks were cut to a large extent, while investments in the energy sector were enhanced.

The fund does not shy away from taking exposure to the tune of 7-9 per cent in select individual stocks. But these investments are in quality names where earnings visibility is quite high. IDFC Equity’s value focus is reflected in stock choices too. For example, TCS and Infosys, both find a place in the portfolio. But a cheaper Infosys finds itself among the top five holdings. Investments can be considered in the fund for average returns in line with the benchmark.

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