ICICI Pru Dynamic: Buy

The stock markets are perched precariously on a peak and you don’t want high-risk mid- and small-cap stocks.

At the same time, you wish to benefit from any further rise or guard your investment if the market falls. If this is your take, ICICI Prudential Dynamic is a perfect fit for your portfolio. The fund shuffles its equity, debt and cash allocations with panache, making it a safe bet in any market situation.

It also has a proven track record of delivering steady returns. ICICI Pru Dynamic has convincingly outpaced its benchmark, the Nifty, over one-, three- and five-year timeframes.

With a general preference for large-cap stocks and an ability to contain losses during downturns, the fund is suitable for investors who have a low to medium risk appetite.

Fund strategy The fund’s mandate allows it to straddle large-, mid- and small-cap stocks. But Pru Dynamic plays it safe, having a large-cap tilt to its portfolio across market cycles. Large-cap stocks (market capitalisation of ₹7,500 crore and above) generally constitute about 70-75 per cent of its total holdings. The fund betters the benchmark by a good margin during rallies.

It adopts a rather defensive approach during times of volatility, holding cash off and on, or choosing to invest in debt instruments. This approach also helps the fund to minimise losses extremely well during market dips. Redeployment of cash during rallies has also been fairly swift.

Although its approach is defensive, over the long term, it has been a top-notch performer deftly deploying idle cash, capitalising on attractive debt instruments and entering or booking profits in stocks at the right time.

The fund’s strategy has worked well over the long term. In the last five years, when the markets witnessed quite a bit of volatility, the fund has managed to beat its benchmark 87 per cent of the time. Over the last one year, Pru Dynamic has done a balancing act between cyclical and defensive stocks. So, while banks and software still remain among the top choices, holdings in the power, construction projects and auto ancillary space have been increased. The fund did not hold on to too much cash, given the rising markets.

But exposure to fixed deposits, inflation indexed bonds and other sovereign bonds, has been 10-15 per cent. Some good stocks the fund picked up in the mid-cap space include Voltas, Kalpataru Power Transmission, Balkrishna Industries, Jagran Prakashan and Texmaco. Its top bets have been on proven large-cap names, which lend it a fair degree of stability.

Despite going heavy on debt or cash to the tune of 15-18 per cent of its portfolio, the scheme has rarely lost out on any prolonged rallies.

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