BNP Paribas Equity: Buy. Betting on niche plays

A fund that has quietly moved up the ranks over the past few years is BNP Paribas Equity. Benchmarked against the Nifty, the scheme is a top-quartile performer among large-cap funds across time frames. It overcame a poor run in 2008-10 with a change in fund manager and has consistently delivered more than the Nifty since.

On an annual rolling return basis in the past five years, the fund has bettered the Nifty 93 per cent of the time. In the one, three, and five-year timeframes, it has outperformed the Nifty by a solid margin of seven to 24 percentage points. Even compared to a broader index such as the BSE 100 or BSE 200, the fund has stayed ahead across time frames.

The fund usually puts around 80-85 per cent of its portfolio into large-cap names with the remaining in mid-caps.

But with a strategy of backing market leaders or niche plays, the fund’s picks are usually quality names such as Just Dial, Motherson Sumi, and Jubilant FoodWorks. Investors with a moderate risk appetite and a long-term horizon can invest in the BNP Paribas fund through the SIP route.

The fund made merry in last year’s frenzy for smaller stocks, putting up to a quarter of the portfolio in the mid-cap space.

In the rally that started in September 2013, the fund’s 73 per cent return is well above the category average of 66 per cent. In the 2011 and 2012 market cycles as well, the fund did better than its category.

BNP Paribas Equity takes relatively higher cash calls of 8-10 per cent when the going gets rough.

The fund has been adept at switching in and out of sectors. For example, it made timely bets on logistics, cement and engineering early on in the current rally. Their share has been pruned in the past couple of months as stocks soared well ahead of fundamentals.

Similarly, after pruning its holdings in the FMCG sector in 2012 due to their headlong dash, the fund moved back into the sector towards mid-2013 before getting out of it in the 2014 rally.

While banking, of course, holds the maximum weight in the current portfolio, the fund has also bet heavily on the telecom space through Bharti Airtel and Idea Cellular. Holding has been recently cut in software, which could be a prudent move.