IDFC Premier Equity: HOLD

In the past year, IDFC Premier Equity has slipped down the ranking charts, ceding its top-ranking position to funds such as Canara Robeco Emerging Equities and ICICI Pru Midcap.

In the one-year period, the mid- and small-caps category clocked 89 per cent returns.

The BSE and CNX Mid-cap indices were up 72 and 66 per cent, respectively. In comparison, IDFC Premier managed about 73 per cent.

Investors can retain units in the fund, though fresh exposure must await a significant improvement in performance.

The scheme held several winners such as Kaveri Seed, Blue Dart Express, VA Tech Wabag and Page Industries.

But a slower redeployment of cash and debt into equities during the past year’s rally, and peers snapping up more multi-baggers than it did, meant that it slid behind on returns.

The fund’s performance during the mid-cap-driven 2012 rally also paled in comparison with peers. On an annual rolling return for the past five years, it has beaten its benchmark the BSE 500, almost 90 per cent of the time.

It’s also good at containing losses in correcting markets.

The fund scores in terms of a solid long-term performance record, a conservative approach, focus on value and higher risk-adjusted returns.

With quite a few other mid-cap funds that have neatly caught the recent mid- and small-cap-driven rally and are also consistent, investors have other good choices in the space.

Consistently good mid-cap funds HDFC Mid-cap Opportunities, Franklin India Smaller Companies and Mirae Asset Emerging BlueChip have returned 90 to 106 per cent in the past year.

These funds have delivered 28 to 36 per cent returns in the three-year period, surpassing IDFC Premier’s 24 per cent.

IDFC Premier held 23 per cent in cash and debt in August last year, when the market bottomed out.

The move back into equities was slower than other funds.

This approach and fewer stocks that saw stratospheric returns resulted in lower gains than peers.

But if the mid-and-small caps category turns volatile in the light of the high valuations many stocks trade at, IDFC Premier’s cautious approach will serve investors well.

The fund prefers stocks with low debt and which can quickly scale up.

In terms of sectors, it added software, chemicals, auto ancillaries and automobiles.

It also cuts back on holdings when prices rise swiftly — FMCG and bank stocks, for example, were cases where exposure was cut early on in 2013.

More recently, it has pared holdings in stocks such as Zee Entertainment, Larsen & Toubro, Ramco Cements, Torrent Power, Gujarat Gas and Shriram Transport Finance, which have surged.

COMMENT NOW