DSP BlackRock Top 100 Equity - HOLD

Unit-holders of DSP BlackRock Top 100 Equity can retain their holdings in the fund. Though short-term returns have taken a hit, the fund displays an ability to deliver good returns over the long term.

Over the last five years, it has gained 15 per cent compounded annually, in line with its benchmark, the BSE 100. It has marginally outperformed the benchmark over a three-year period. In these two time periods, the fund has given better returns than peers such as Kotak 50 and Reliance Vision.

Performance and strategy

DSP BR Top 100 has a mandate to invest in large-cap companies that fall in the top 100 in terms of market capitalisation. Typical of this mandate, the fund contains downsides well during periods of market corrections. For example, during the 2008-09 market correction, the benchmark fell over 60 per cent whereas the fund declined only 50 per cent.

Similarly, in the 2010-11 market correction, the BSE 100 tumbled 27.5 per cent while the fund slid only 20 per cent. However, during the bull run, the fund delivered good, but not top-of-the chart returns.

During the ongoing up-move that started in January 2012, the fund has been trailing its benchmark by almost 5 percentage points.

The fund’s underperformance in the last one year can be attributed to its heavy exposure to banks.

While the fund has constantly churned the stocks within the sector, this churning has not helped as the sector remained volatile.

Its entire gains made from January 2012 to May 2013 got wiped out in a short span after that between May and August.

Besides, the recent slip on performance can be attributed to the fund’s predominant bets on stocks such as Reliance Industries, ICICI Bank and Bharat Petroleum Corporation, which have been underperformers of late.

But to its credit, the fund does have some good picks in software stocks, such as Wipro, Infosys and Tech Mahindra, which have done well in recent times.

The fund has also trimmed its exposure in oil, non-ferrous metals and industrial apital goods, sectors that have been market underperformers. It has made an entry into the telecommunication and mineral sectors. .

Bharti Airtel, Idea Cellular, Sesa Sterlite and Coal India are some of the stocks that found a berth in the fund’s portfolio over the past one year.

With software and consumer non-durables among the top three sectors, the holding currently has a defensive look. Along with banks, its top three sectorsaccount for 43.3 per cent of the fund’s portfolio. It has a compact portfolio of 35 stocks.

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