DSP BR Top 100 Equity: Buy

After a spell of bad performance in 2013, DSP BlackRock Top 100 Equity has bounced back now. Premature calls on sectors such as crude oil, infrastructure and metals had hurt performance in 2013.

But with these sectors now the flavour of the market, the returns picture has revived. While the fund is a mid-quartile ranker among large-cap oriented funds in the one-, three- and five-year periods, it is extremely consistent in beating its benchmark over the long term. It is also adept at containing losses during bearish markets.

In the 10-year period, the fund’s annual return of 22.1 per cent is not only well above the BSE 100’s 17 per cent, but also the category’s average of 19 per cent. DSPBR Top 100 Equity is suitable for long-term investors looking for a solely large-cap play and who prefer stable and not necessarily top-of-the-line returns.

Performance In the one-, three-, and five-year time-frames, the fund has done better than its benchmark by one to four percentage points.

The scheme scores in limiting losses; in the two previous bearish markets in 2011 and 2008-09, the fund lost six to 14 percentage points lower than the BSE 100. In the past 10 years, in has beaten the BSE 100, its benchmark, 80 per cent of the time on an annual rolling return basis.

DSPBR Top 100 tends to take quick sector calls and churns, buying into momentum as large-cap stocks tend to have lesser room for ‘discovery’ in prices compared with mid-caps or small-caps. As a result, its top sector holdings undergo frequent change.

The fund has largely moved away from the consumption theme into industrials and manufacturing over the past few months. FMCG and auto stocks, which the fund held in good measure from mid-2011 to 2013, were pruned.

Similarly, the fund retained higher exposure to pharmaceuticals until mid-2012.

While auto was among the top three sectors in January this year, infrastructure came up on top by May, accounting for 10.4 per cent of the portfolio, primarily by way of exposure to the stock of Larsen & Toubro.

The fund lifted exposure in mining stocks such as NMDC too and engineering stocks such as Siemens. Software exposure, which was quickly raised in early 2013 to a peak of 23.7 per cent, was also cut in 2014.

Because DSPBR Top 100 invests its corpus entirely in large-cap stocks, it loses out on mid-cap rallies unlike peer funds. Funds that have done better, such as BNP Paribas Equity, Franklin Prima Plus, or HDFC Top 200, have a part of their portfolio in mid-cap stocks to pep up returns.

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