Mutual Funds

SBI Bluechip: BUY

K Venkatasubramanian | Updated on March 23, 2014


Not quite sure if the BJP will win? Or if Modi will work miracles on the market? Well then, you may want to play it safe with a large-cap fund which doesn’t go out on a limb to buy risky stocks.

SBI Bluechip fits the bill. It is a large-cap fund that invests in stocks in the BSE 100 universe.

Over one-, three- and five-year timeframes, it has outperformed its benchmark, BSE 100, by a margin of 1.5-5 percentage points. It has remained in the top quartile in its category over the past few years. Its returns of 10.8 per cent compounded annually over a three-year period place it among the top funds in its category, higher than peers such as UTI Top 100, DSPBR Top 100 and Canara Robeco Large Cap Plus.

The fund participates in market rallies while managing to contain downsides reasonably well during falls.

Though the scheme’s portfolio does have a defensive tilt, it also invests in cyclicals which would help it gain from any broader market upswing. It takes active cash calls across market cycles, which ensures that any erosion in its NAV is limited.

SBI Bluechip is for investors with a moderate risk appetite looking for steady rather than spectacular returns. It can be a suitable diversifier to the portfolio. Exposure may also be taken through the systematic investment plan (SIP) route.

Portfolio and strategy

The fund invests predominantly in large-cap stocks (greater than ₹7,500 crore market capitalisation) with exposure to mid-cap stocks generally restricted to less than 10 per cent of the portfolio. It also takes cash position to the tune of 7-10 per cent across market cycles. This makes the theme a ‘safe’ bet, especially with regard to downside containment.

Banks have always been the top holdings of the fund. Despite the segment being knocked down in the past one year, the scheme has remained invested in the sector and is set to benefit from the uptick in financial services stocks. Software and pharma are the other key segments the fund has held across market conditions. It increased its exposure to software in the last one year and was able to participate well when IT stocks rallied.

The scheme has reduced its holding in consumer non-durables in recent years in light of higher valuations, which too helped returns. It lowered exposure to energy stocks. The fund maintains a portfolio of around 50 stocks, with exposure to individual stocks, barring the top few, less than 5 per cent.

HDFC Bank, Infosys, ITC, Motherson Sumi, RIL and Bharti Airtel are some top holdings. It does not indulge in heavy churning of portfolio. Choose the fund to generate above-average, rather than top-notch returns.

Published on March 23, 2014

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