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Investors can buy the units of mid-cap fund IDFC Premier Equity, a top-notch performer in its category over the years.
It has been consistent in delivering returns across market cycles and manages to latch on to the sectors with the right momentum, while also protecting erosion in value during corrections.
Over one-, three- and five-year timeframes, the fund has outperformed its benchmark – BSE 500, by convincing margins of 7-11 percentage points.
Even vis-à-vis the CNX Midcap index, its performance compares favourably with 4-11 percentage points more gains. In the last five years, the fund has delivered compounded annual returns of 9 per cent, placing it among the top few funds in its category.
By judiciously churning its top sector holdings and also moving to significant cash and debt positions when markets correct, IDFC Premier has stayed ahead of most peers.
The fund is suitable for the core portion of an investor’s portfolio and for those with moderate risk appetite. IDFC Premier is closed for lump-sum investments, but is open for sums parked through the SIP (systematic investment plan) route.
It may suit investors to take the SIP route for longer timeframes, say, 3-5 years, to ride out market volatility and average costs.
Portfolio and strategy
Over the past few years, the consumption story has played out pretty strongly with sectors such as consumer non-durables and consumer durables getting heavily re-rated in the markets.
IDFC Premier has latched on to this theme and has over 20 per cent of its portfolio invested in such sectors.
The fund did not go overboard on any other sector with allocations generally limited to less than 10 per cent.
Textiles, transport and gas are some sectors that the fund has favoured. In recent months, banks too figure among the top few segments held. It has reduced exposure considerably to underperforming sectors such as power and capital goods.
The fund moves into cash positions in excess of 20 per cent if markets turn negative or volatile as was the case in late 2011. In recent months, the fund has invested in equities to the tune of 90-93 per cent.
The stock selection of the fund is offbeat with many interesting picks. It has consistently bet on stocks such as Page Industries, Kaveri Seed Company and Bata India that have been multi-baggers in recent years.
United Spirits and Blue Dart Express are other such examples. Though valuations in some cases may be stretched, select mid-cap stocks are known to trade at a valuation premium to the broader markets.
IDFC Premier Equity delivers consistent returns over the long-term which is commensurate with the risk inherent in mid-cap stocks.
The NAV per unit of the growth option is Rs 39.25
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