SBI Bluechip: One to ride out choppy markets

Against the 30 per cent gains clocked by the bellwether indices in 2014, markets have remained quite volatile so far this year. The overall picture on corporate earnings remains dismal and a pick-up in economic growth continues to remain elusive. At this juncture, investors with a low risk appetite can restrict themselves to large-cap funds. Providing a cushion against downside risks, these funds are well-suited to tide over choppy markets.

SBI Bluechip is one of the good choices among large-cap funds. Benchmarked to the BSE 100 index, the fund has outperformed peers, such as UTI Top 100, L&T Large-cap and DSPBR Top 100 over one-, three- and five-year periods. It has also beaten its benchmark by a margin of 5-10 percentage points over three and five years and by almost 20 percentage points in the last one year.

Across market cycles, SBI Bluechip invests predominantly in large-cap stocks (market capitalisation of ₹10,000 crore and above). It generally restricts mid-caps to a maximum of 10 per cent of its holdings.

Besides, depending on market conditions, the fund also varies its equity holdings between 85 and 95 per cent of the portfolio, redirecting allocations to debt and cash when markets seem overheated. These strategies help the fund handle volatile or falling markets well, such as 2011 or 2013. On both occasions, it outperformed the benchmark comfortably. The fund is also quick to step on the gas when the tide turns. A cash holding of 8-10 per cent in 2011, for instance, was quickly redeployed in equities and the fund gained from the 2012 rally.

Astute sector picks — be it entering IT stocks in 2010, the building up of holdings in pharma and consumer non-durables in 2011 and 2013 respectively, or the preference for autos instead of capital goods in recent times — lend confidence regarding the fund’s ability to stay on top of the market.

Although banks and software are the top choices currently, with multiple headwinds, the fund has rightly cut down exposures to these segments over the last few months. But even while trimming overall allocation to banks, the fund has shrewdly picked up holdings in some of the better performers among private sector banks, such as Axis Bank and IndusInd Bank in the last few months. Similarly, it continues to prefer auto over capital goods in the cyclical space, paring holdings in stocks such as Thermax and SKF India, while adding to Maruti Suzuki.

Other auto stocks that find a place are Bharat Forge, Motherson Sumi and Tata Motors. DB Corp, FAG Bearings and Strides Arcolab are among the few mid-caps in the current portfolio.

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