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Considering the volatility in the markets, a fund that predominantly invests in large-cap stocks is a safe bet for conservative investors. Aditya Birla Sun Life Top 100 fits the bill.
Benchmarked to the bellwether index, the Nifty 50, the fund stays true to its moorings across all market conditions. Its mid-cap exposure (stocks with market cap of ₹10,000 crore and below) does not exceed 10-15 per cent of the portfolio even in secular bull runs. It also adopts a defensive approach in volatile/falling or overheated markets by reducing equity exposure and moving to cash/debt.
Performance and strategy
The fund has underperformed its benchmark by about three percentage points in the last one year. This is because the fund took a cautious approach since early 2017 itself, cutting mid-cap and equity exposure. Mid-caps have constituted only 3-4 per cent of the portfolio in the last one year, while equity exposure has remained at 89-94 per cent. Besides, considering that markets were getting heated up, the fund increased stakes in defensive sectors such as consumer non-durables since early 2017.
But the markets shot up for most of this period, barring the last two months. The fund’s strategy should begin paying off now, considering the bouts of volatility seen in recent times.
Over three- and five-year periods, though, the fund has outperformed the benchmark by 2-5 percentage points. Returns in these periods are on par with or better than that of peers such as ICICI Pru Top 100, DSPBR Top 100, UTI Top 100 and IDBI Top 100. Thanks to its defensive strategy, ABSL Top 100 has an excellent track record of outdoing the benchmark in volatile markets such as 2011, 2013, 2015 and 2016.
At the same time, the fund does not lose out in rallies. For instance, after the bear markets of 2011, the fund held only about 88 per cent in equity in early 2012. But equity holdings zoomed to 96 per cent in the next month and stayed predominantly over 95 per cent during the rally that year. Ditto, with the rally that began in September 2013. ABSL Top 100 also rides on the right sectors to give a leg-up to returns. It latched on to cyclicals in 2014 and defensives such as pharma in 2015-16.
Current portfolio
In its latest February 2018 portfolio, the fund holds only about 92 per cent in equities and 3 per cent in mid-cap stocks. Banks and Finance are the top sector choices for the fund across seasons. Axis, YES Bank, IndusInd, HDFC and ICICI Bank stocks are preferred , along with SBI and Bank of Baroda .
The fund has been benefiting from the good run of auto stocks in the last one-two years. Stocks such as Maruti Suzuki, Tata Motors and Mahindra and Mahindra, which still boast of good prospects, find a place in the latest portfolio.
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