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Equity markets have made a comeback, post-Budget. But corporate earnings are yet to play catch-up and may take a while to revive. Investors who are still wary of the volatility in equity markets could bet on L&T India Prudence Fund, an equity-oriented balanced fund.
Launched in February 2011, it is a relative newcomer to the balanced fund universe. While it has a limited track record, it has performed across market cycles — in the 2012 and 2014 rallies and the lacklustre market of 2013 and 2015. Over one, three and five-years, it has beaten its category average by 3-5 percentage points.
The fund has gained from deft allocation between assets. In the bond rally of 2014, for instance, when the yield on 10-year government bonds fell by a little over a percentage point, the fund increased its exposure to G-Secs, which worked in its favour. By December 2014, the fund had about 27 per cent of its assets in government bonds.
Deft stock callsL&T Prudence also made some deft moves within its equity portfolio. Trimming its exposure to software, the fund increased its holdings in banks in 2014, gaining from the rally in cyclicals. In 2015, though, the fund was quick to cut its exposure to PSU bank stocks and cement and, instead, upped its holdings in defensives. Betting on refiners such as HPCL that rallied sharply also paid off.
The fund also plays it safe on its equity portfolio, investing 65-75 per cent of its equity portfolio in large-caps. Even in market rallies like the one seen in 2014, it kept its exposure in mid-caps to 10-20 per cent.
Moreover, the fund takes a diffused bet investing in 60-70 stocks, thus mitigating risk. On the debt side, too, the fund has invested mainly in G-Secs or AAA rated bonds. As of April 2016, the fund held around 70 stocks with exposure to over 20 sectors and equity exposure of 67 per cent.
Top holdingsIts top five holdings are banks (12 per cent), consumer non-durables (11 per cent), software (8 per cent), pharmaceuticals (5 per cent) and construction projects (4 per cent). The top three stock holdings are across different sectors — Infosys (4.6 per cent), ICICI Bank (3.2 per cent) and ITC (2.8 per cent).
It holds 9 per cent in bonds and NCDs, mostly in AAA rated securities. Sovereign securities account for 11 per cent while around 9 per cent is held in cash or cash equivalents.
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