Investors wanting a safer bet in a volatile market can consider Birla Sun Life Top 100.
Consistent out-performance of its benchmark and peers — along with its mandate to invest mainly in large-cap stocks — makes it an ideal avenue for retail investors to park money at this juncture.
The fund has outperformed its benchmark, Nifty 50, in the last one and three years. In the last three years, it delivered a return of 17.1 per cent as against the benchmark’s 9 per cent. On a one-year rolling return basis, it has outdone its benchmark 99 per cent of the time in the last three years.
While ICICI Pru gave a lower return of 15.2 per cent, UTI Top 100 and DSP BlackRock Top 100 delivered 14.3 per cent and 12.9 per cent, respectively.
While the title “Top 100’ might suggest that these funds invest only in Top 100 companies by market capitalisation, its portfolio managers do have flexibility to invest in mid-cap companies. Birla Sun Life Top 100, for instance, as per its mandate, can invest up to 35 per cent in companies outside of Top 100.
Currently, the fund has about 11 per cent exposure to mid and small-cap companies as against 23 per cent exposure for ICICI Pru Top 100 and 28 per cent exposure for UTI Top 100. In contrast, DSP BlackRock Top 100 only had a 5 per cent exposure to companies outside of Top 100.
Portfolio Financials, energy, automobiles, technology and healthcare have been Birla Sun Life Top 100’s top five sector holdings.
As compared to its benchmark index, the fund is overweight on financials, healthcare and engineering and underweight on technology, automobile and communication.
In the last one year, the fund increased exposure to private banks (2.6 per cent), auto and auto ancillaries (2.8 per cent) and electric equipment (1.9 per cent).
During the period, it also pared exposure to large software companies (-5.2 per cent), tyres (-2.1 perc ent) and Indian pharma companies (-1.5 per cent).
HDFC Bank, Tata Motors, ICICI Bank, Infosys and ITC were its top five stocks as of October 2016. Maruti Suzuki, IndusInd Bank and Indian Oil Corporation have been top picks that have paid off handsomely for the fund.
In contrast, Infosys, HCL Technologies and Sun Pharma were a drag on the portfolio, contributing negatively to fund returns.
Smooth ride The fund has performed well across market cycles — beating the benchmark returns in bull and bear phases — most of the times. In eight of the last 10 years (calendar), its returns have been higher than its benchmark’s.
The years 2007 and 2009 were a bad patch though — when the equity market rallied strongly and the fund underperformed its benchmark index.
In the month of October, it had 96 per cent of its portfolio into equities with the rest in other debt-related instruments. It increased exposure to equities by 7 per cent in the last two months.
While the fund doesn’t usually have cash holdings of more than 20 per cent, during the crisis month of February 2009, when the global financial crisis roiled markets, its non-equity exposure had increased to 22 per cent.