ICICI Prudential Focused Bluechip Equity: Invest

A spate of negative news flow — slowing economic growth, continuing rupee weakness and surging current account deficit — has heightened volatility in the equity markets.

In the current scenario, it may be prudent to stick to diversified large-cap funds, which have demonstrated their ability to contain the downsides quite well. ICICI Prudential Focused Bluechip Equity is a classic example.

Though the fund has only been in existence for a little over five years, it has consistently managed to deliver returns higher than its benchmark and category average since inception.

Investors with a moderate risk appetite may consider buying units of the fund.

Steady in a falling market

The fund’s sector choices and stock selection have helped it contain the downside in a falling market. For instance, between November 2010 and December 2011, the fund managed to curtail the downside at 13 per cent compared with a 21 per cent fall in the Nifty.

During this period the fund increased its exposure to defensives, such as pharma and consumer non-durables, which also aided performance.

Even within specific sectors, paring exposure to underperforming stocks helped deliver top-quartile returns. For instance, during the above period, the fund reduced exposure to Punjab National Bank while increasing exposure to ICICI Bank and Bank of Baroda. The fund has also managed to outperform the benchmark during market rallies. Between March 2009 and November 2010, it raked in gains in excess of 140 per cent compared with 112 per cent managed by the Nifty. Its investments in banking stocks appear well-timed. Similarly, increasing exposure to IT stocks helped the fund better its benchmark. Pruning exposure in laggards, such as power and telecom, also boosted performance.

Sustained Outperformance

The fund managed to outpace its benchmark over one-, three- and five-year periods. On a one-year basis, the fund delivered 10 per cent, higher than the 8.9 per cent gain for the Nifty. Similarly, on three- and five-year basis too, the fund raked in returns of 4.7 per cent and 12.8 per cent, respectively. This is higher than the 1.4 per cent and 5.3 per cent gain for Nifty over three- and five-year periods.

A monthly investment of Rs 1,000 in the fund beginning May 2008 under the systematic investment plan would have fetched annualised gains in excess of 13 per cent.

The fund held 32 stocks in its portfolio as of June. In addition to healthy returns, the fund also scores over its peers, such as Franklin India Bluechip and DSPBR Top 100. This scheme is among the top few funds in the large-cap category over the past five years and is suitable for the core portion of an investor’s portfolio.

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