Fund Call. ICICI Prudential Top 100: Makes the most of market cycles

In the past year, small- and mid-cap stocks have raced ahead of their large-cap counterparts and delivered stellar returns. If you anticipate a correction in mid- and small-cap stocks and want to park a portion of your surplus in large-cap funds, here is one fund that can help you tide over volatility. ICICI Prudential Top 100 has had a good track record of containing downsides during turbulent times. The fund has managed to deliver benchmark beating returns over one, three and five years. It has delivered nearly 20 per cent gains annually, since inception.

If you have a five-year investment horizon and can take moderate risk, you can consider systematic investment in ICICI Prudential Top 100. The fund scores well on consistency. Its one-year return over the last five years has been better than its benchmark’s — Nifty 50 Index — almost 85 per cent of the time.

In the past, the fund has weathered downcycles well. For instance, during the January 2008-March 2009 fall, the fund managed to arrest the fall in its NAV at less than 42 per cent, lower than the 48 per cent slide in the benchmark. Similarly, during the November 2010-December 2011 correction, the slide in the scheme’s NAV was over 5 percentage points lower than its benchmark.

Besides containing downsides well, the fund has also been successful in delivering returns higher than its benchmark during recovery phases. For instance, between December 2011 and January 2013, the fund delivered 36 per cent gains, higher than the 29 per cent clocked by Nifty 50. However, due to its cautious stance on financials as a theme, the fund missed the rally in these stocks in 2014. Also, its cyclical bets such as oil and gas and capital goods failed to play out during this period.

However, the scheme’s performance has improved significantly in the last six months. Holding on to stocks such as BPCL, HPCL, Bajaj Finserv, Divi’s Laboratories, Grasim Industries, Hindustan Zinc and Power Grid Corporation provided a leg-up to the scheme’s performance. These stocks delivered 20-50 per cent gains in the past year, thus helping the fund rake in 19 per cent gain on a one-year basis, compared with a 9 per cent rise in the Nifty 50 Index.

About three-fourths of the fund’s assets are in large-caps. This can help it stay afloat should the market turn slippery. Over the past year, the fund has raised exposure to power, pharma, telecom and financials. It cut exposure to IT during this period. As of July, the fund had 42 stocks in its portfolio.

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