Even as the markets touch new highs, large-cap stocks continue to be favoured in light of the stability in their earnings and visibility in revenues. Investors looking for steady returns and mild outperformance over the benchmark can consider buying the units of ICICI Pru Top 200, a large-cap fund with a reasonable track record.

The fund invests in stocks from the BSE 200 (its benchmark) universe. A good portion of the scheme is made up of picks from the Nifty basket.

Over the one-, three- and five-year time frames, the fund has outperformed the BSE 200. The level of outperformance has been to the tune of 2-3 percentage points. The fund was earlier called ICICI Pru Power and was renamed a few years ago.

In the last five years, ICICI Pru Top 200 delivered compounded annual returns of 18.7 per cent, which places it in the mid-quartile of funds in its category. These returns are higher than those delivered by Reliance Top 200 and DSPBR Equity.

The scheme has managed to contain downsides slightly better than its benchmark during falls, while ensuring reasonable participation during rallies, making it a safe bet.

It may not be a chartbuster, but ensures stable and steady performance over the long term of five-seven years.

Investors with a moderate risk appetite may consider ICICI Pru Top 200 as a diversifier to the portfolio. Investments can be considered in the fund through the systematic route to average costs and ride out volatility in the markets as well.

Portfolio and strategy

The fund treads cautiously with regard to the sector choices and cash calls that it takes, especially when the markets are volatile. It generally maintains a cash level of a little under 5 per cent most of the time and increases that to close to 10 per cent during volatile markets, such as the current one.

Banks and software have remained its top segment picks over the past few years. Though banking stocks did fall heavily, the sector is on a slow revival path.

The software sector has been helped by a combination of steady performance, weak rupee and improving economic environment in the US and Europe. The scheme took the right call by increasing exposure to consumer non-durables last year.

But as valuations soared, it has pared its exposure. Pharma, automobiles, and auto ancillaries are some of its other prominent picks.

ICICI Pru Top 200 invests in large-cap stocks (greater than Rs 7,500 crore market capitalisation) to the tune of over 80 per cent of its portfolio. Its exposure to the mid-cap space is restricted to quality names, such as Bata India, Balkrishna Industries, Tata Motors DVR and Hathway Cable.

The fund does churn its portfolio quite heavily, which may increase the expense ratio. But overall, the scheme may suit those who do not expect spectacular returns, but seek reliable performance over the long-term.

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