ICICI Prudential Top 200: Safe anchor in choppy waters

The past week gave investors a taste of how volatile equity markets can be. In such a fluid scenario, it seems prudent to stick to funds which offer higher safety and stability. ICICI Prudential Top 200 is a good choice in this category.

The fund invests predominantly (at least 70 per cent of the portfolio) in large-cap stocks that should be able to weather any turbulence better than mid and small-cap stocks. At the same time, the fund’s exposure to mid- and small-cap stocks (up to 20 per cent of the portfolio) is used tactically and can provide a boost to returns if the bulls take charge again. ICICI Pru Top 200 adeptly juggles the proportion of large-cap stocks depending on market conditions. For instance, during the pessimistic phase of August 2013, large-caps accounted for 84 per cent of the portfolio.

This fell to 71 per cent when the market was booming in September 2014. Likewise, from 73 per cent in January 2015, large-caps now form about 80 per cent of the fund’s portfolio.

Even the smaller stocks that the fund holds are mostly quality names, such as Redington India and V-Guard Industries, which are unlikely to be pummelled too badly in the event of a market rout. ICICI Prudential Top 200’s track record inspires confidence, with superior performance to the benchmark (BSE 200) both during market upsides and downsides. Its ability to contain losses will be useful if the market remains choppy.

Over one, three and five-year periods, the fund’s returns have been better than the benchmark’s by 5-10 percentage points. Its consistent outperformance is reflected in its daily rolling returns which have been higher than that of the benchmark 93 per cent of the time over the past five years.

Among its large-cap peers, the fund is a top quartile performer across time periods. Its performance is better than that of HDFC Top 200. The fund has been smart with its sector rotation and stock picks.

Over the last year, it increased stake in auto stocks which have benefited from the cyclical recovery. It has also loaded up on large-cap pharma stocks which should gain from economic improvement in the US, their major market. In particular, the fund has made use of the recent fall in Sun Pharma and increased its stake significantly.

Raising stake in large-caps such as Bajaj Finserv, which has doubled, boosted the fund’s returns last year. So have mid- and small-cap picks, such as Chennai Petroleum and Sterling Holiday Resorts. Timely exit from losing stocks such as Vedanta has also helped. Over longer time periods, stocks such as HCL Technologies and Balkrishna Industries have turned multi-baggers.

ICICI Prudential Top 200 has now invested about 90 per cent in equity and 10 per cent in debt instruments.

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