ICICI Prudential Focussed Bluechip: Go for this bluechip shield

The ripple effect of the slowdown in the Chinese economy has not spared India, despite domestic growth remaining stable. The country’s bellwether indices Sensex and Nifty have been on a falling spree — shedding almost 10 per cent over the last two weeks. And the volatility in Indian equities may only increase with any negative news flow from other global markets.

So, if you want to build a volatility-proof portfolio to generate healthy returns in the long term, equity schemes that bet on relatively less risky blue-chip stocks may be the ideal choice. ICICI Prudential Focussed Bluechip is one such that invests predominantly in the stocks of large companies.

This has cushioned the fund against the free-fall in stock prices. Investors with a moderate risk appetite and a three-to-five-year horizon can consider parking a portion of their surplus in this fund. With the market expected to remain volatile in the short term, one can use the systematic investment route to invest in this fund.

In the past, the decline in the fund’s NAV during corrective phases has been lower than its benchmark, CNX Nifty. Besides offering downside protection, the fund has been equally agile in delivering healthy returns when the tide turned in favour of equities. The fund has had a proven track record of consistently delivering benchmark-beating returns. For instance, its one-year returns over the past five years have been better than the benchmark 95 per cent of the time. It thus scores over its peers, such as Franklin India Bluechip and L&T India Large Cap on consistency.

The fund’s returns have been higher than both its benchmark CNX Nifty and the average of other large-cap funds, across time periods. The fund tops the return charts over three- and five-year time-frames, clocking returns higher than the benchmark by over 5 percentage points. However, in the last one year the fund’s ranking has slipped from top to mid quartile.

The fund’s strategy to play the economic recovery theme by being overweight on financials, engineering and metals early on impacted performance. Also, its decision to reduce exposure to defensive themes, such as pharma, IT and FMCG, prematurely ahead of the volatility caught the fund on the wrong foot.

Besides sector shifts, select stock picks in the large-cap space, such as Cairn India, JSW Steel, ACC, Punjab National Bank and NTPC failed to play out.

However, over the last three months, the fund has increased its allocation to pharma and FMCG. This should help the fund contain downsides better, should the turbulence in Indian equities continue.