Birla Sun Life Top 100: Buy

Investors looking for a predominantly large-cap fund with a consistent record could consider investing in the units of Birla Sun Life Top 100 fund (BSL Top 100). The fund came into existence in late 2005, and has weathered several ups and downs since.

A stable large-cap portfolio would be suitable for investors with a moderate risk appetite looking for earnings stability and downside protection rather than flashy numbers.

BSL Top 100 sticks to investing in large-cap stocks, mostly from the Nifty or the BSE 100 basket. In order to propel returns more than its benchmark, the fund puts around 15-20 per cent of the portfolio into select mid-cap stocks.

The fund ranks among the top quartile of schemes in its category across time periods. It has outperformed peers such as ICCI Pru Top 100 in the one-year period. The scheme has also done much better than other peers such as DSPBR Top 100 over the longer term. BSL Top 100 also proved its mettle during market corrections, limiting downsides. In the 2011 slide, for instance, the fund fell two percentage points less than the Nifty.

Over the one-year period, the fund has delivered 50.1 per cent returns, well ahead of its benchmark Nifty’s returns of 27 per cent.

In the longer five-year period, BSL Top 100 has delivered 16.9 per cent annually over the last five years. The margin by which it has raced past the Nifty is a good 5 percentage points in this period.

Given its steady performance over the years, investors can take the SIP (systematic investment plan) route to take exposure to the fund. A time horizon of five years is needed to gain significantly from the scheme. Even as markets hit new highs, there are risks in the form of geo-political tensions affecting crude prices. Domestically too, it remains to be seen if economic activity would pick up and sluggishness would be shrugged off, due to measures taken by the new Government. Mid- and small-cap stocks have run up sharply already.

The scheme takes debt and cash calls during volatile markets. In general, BSL Top 100 has accorded a weightage of 5-10 per cent across market cycles to debt instruments and cash, indicating a relatively cautious approach.

Banks and software have been sectors that have been favoured by the fund across timelines. The former has rebounded spectacularly over the past few months while the latter has held steady on the back of consistent earnings growth. The scheme has also held on to pharma and consumer non-durables in varying proportions of significance depending on the markets, giving it a somewhat defensive tilt.

But the fund also got into quality stocks in the automobiles and petroleum products sectors, which ensured adequate participation in the recent rally driven by cyclicals.

Thus the scheme has managed to have the right blend of defensive and momentum sectors, which has resulted in consistent outperformance over the past three-four years.

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