Bad news on the corporate earnings front and expectations of a weak monsoon have wreaked havoc in the market in recent times. Prudence, in such volatile times, involves taking exposure to funds that play it safe, especially if you have a low risk appetite. Birla Sun Life Top 100 fits the bill. The fund invests predominantly in quality large-cap stocks, with mid-cap holdings barely crossing 10 per cent of its portfolio across market cycles.

The fund has also fared better than peers, such as UTI Top 100, ICICI Pru Top 100 and DSPBR Top 100, over longer periods of three and five years. Overall, the fund has bettered the Nifty by 6-8 percentage points over one, three- and five-year periods. Over the longer term, it has beaten the category average by around 3 percentage points.

Defensive allocations The fund exhibits an ability to outperform its benchmark, the Nifty, in falling and volatile markets. Two factors help in holding the fort in such conditions. One, its deft reduction in equity holdings when markets seesaw; two, its appropriate sector choices.

In the 2008-09 market crash, for instance, it brought down equity holdings to 80-85 per cent, stepping up on cash and debt. Ditto in 2011. At the same time, it is quick to spot the changing tide. This has helped the fund latch on to and gain from rallies — 2012 and 2014 being good examples. The fund outperformed the above mentioned peers by a wide margin in these rallies.

Appropriate sector choices — be it turning to the defensive pharma space in choppy markets, or riding on industrial capital goods and construction in 2010 and 2014 — also stand BSL Top 100 in good stead.

The fund generally holds a diffused portfolio of 60-70 stocks. Rarely do bets on individual stocks go above 5 per cent, thus bringing down concentration risk. Banks and software are normally the top sectoral bets.

But the fund has cautiously reduced holdings in this space in the last few months, with issues such as stagnant loan growth and ballooning non-performing assets plaguing many banks.

With the IT sector too facing rough weather, holdings have been pared here. BSL Top 100 is now betting on a blend of cyclical defensive stocks through higher holdings in the auto and pharma space.

Smart moves The fund has been nimble on its feet in the last few months, picking up stocks with strong growth prospects, such as Apollo Tyres, Dish TV, Kotak Mahindra Bank and Cipla. Mid-caps in the portfolio include Gujarat State Petronet, Bata India, Sanofi India and Shoppers Stop.

Related Topics
comment COMMENT NOW