Fund Call. Birla Sun Life Balanced 95: A sunny corner in stormy markets

Fresh uncertainties on global growth and fund flows into emerging economies may continue to keep Indian stock markets on tenterhooks for some more time. Equity-oriented balanced funds may be a good option to beat the volatility. Birla Sun Life Balanced 95 (BSL 95) is a safe bet in this space.

In falling and yo-yoing markets, BSL 95 remains resilient, outperforming the Sensex/Nifty and the broader BSE /Nifty 500 indices. In 2011, when the bellwethers and broader markets lost 25-27 per cent, the fund lost only 14 per cent. In the seesawing markets of 2015, the fund emerged on top, gaining 3 per cent, while the indices fell 1-5 per cent. The fund usually holds only 65-70 per cent in equities in volatile times, compared with around 75 per cent during rallies.

Besides increasing exposure to equities, the fund latches on to rallies by stepping up holdings in mid-cap stocks (market cap of ₹10,000 crore and below). In the bull run of 2014 and early 2015, for instance, the fund held 20-25 per cent of its equity portfolio in mid-caps compared with the 15 per cent levels it cut down to later on. The fund takes good calls on the debt side, too. It steadily increased holding in government securities from mid-2014 and has benefited from the rise in bond prices. It also increased exposure to corporate debt to profit from higher rates before they started trending down.

Overall, on one-, three- and five-year basis, the fund has beaten the category average by 2-3 percentage points. Its performance is on par with or better than funds such as SBI Magnum Balanced and HDFC Prudence in these periods. Interestingly, it has matched the performance of diversified equity funds, such as Birla Sun Life Frontline Equity in these timeframes as well.

Top sectors are usually a blend of cyclicals and defensives. With all the ongoing NPA issues, the fund has gradually cut holdings in the banking space since 2015. Most of its current holdings are in private banks such as YES Bank, IndusInd Bank and Axis Bank. It cut down on auto stocks in 2015 due to rocketing valuations. But the fund has increased stakes in the sector again this year. Betting on increase in rural consumption, it entered Mahindra and Mahindra recently. Tata Motors is another stock where it has increased holdings. On the debt side, BSL 95 is looking to benefit from rate cuts by the RBI by upping stakes to around 20 per cent in long-term government securities since December 2015. While it does hold a few AA or A rated bonds on the corporate debt side, most of the investment is in AAA bonds such as of Power Finance Corporation and Rural Electrification Corporation.

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