ICICI Pru Top 200: Hold

Investors can retain their holdings in ICICI Pru Top 200 based on its steady outperformance of its benchmark, and correct sector plays. For instance, it pared holdings in large software, and oil and gas companies last year.

It also has an exposure to mid-cap and small-cap stocks, with their share moving between 14 and 23 per cent over the past three years. But despite the mix of these stocks in the portfolio, the fund has not performed as well as similar funds. Selections in the small-cap and mid-cap space such as Kalpataru Power Transmission, Sadbhav Engineering, Blue Star and JBF Industries, which have been sedate performers, have moderated returns.

The fund’s December portfolio valuation, at 19 times, is slightly higher than its benchmark BSE 200 and the Sensex, indicating few over-priced stocks.

Performance

The fund’s 20 per cent one-year return is above its benchmark BSE 200’s 17 per cent. Over three- and five-year timeframes too, the fund has bettered its benchmark by a margin of two percentage points.

The fund also appears to be able to contain slips, as it had fallen three-five percentage points less than its benchmark during the market downturns of 2008-09 and 2011. But on a five-year rolling return basis, the fund has managed to beat the benchmark only about 62 per cent of the time. It has also lagged peers such as Birla Sun Life Frontline Equity in all three time-frames, while others such as Reliance Top 200 have overtaken it in the past three years.

Strategy

The fund bets on sector potential. In 2011, for instance, it slowly exited power stocks, whose share had been built up during the bull run of 2009-10. The fund has also largely stayed away from the beleaguered realty sector.

Similarly, in 2012, the fund correctly bought into private sector banking companies. It also raised exposure to mid-cap stocks to 15 per cent, well above the levels of the earlier years — mid-cap stocks had a superlative run in 2012.

Meanwhile, the fund gradually reduced holding in software, oil and gas and telecom stocks as well. But it did not increase share of pharma stocks. Neither did it ride the FMCG wave except for GSK Consumer Healthcare, which has been an outperformer only over the past three months. The consumer theme is represented by select auto stocks and ITC, which have weathered the slowdown better. But given the signs that consumers are now penny-pinching, the consumer theme may well turn sour.

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