Birla Sunlife Frontline Equity Fund: Buy

With the market showing signs of edginess, a large-cap fund with a solid track record of delivering across market cycles may just be what the doctor ordered. Birla Sunlife Frontline Equity Fund, an old warhorse, fits the bill well.

The fund’s annualised return since its inception in 2002 is an enviable 25 per cent.

It has beaten its benchmark, the BSE 200, convincingly by 5-9 percentage points over various time periods.

It has been ahead of the BSE 200 about 97 per cent of the time over the last five years.

Birla Sunlife Frontline Equity Fund has been adept at containing downsides too, losing less than the benchmark during periods of market decline in 2009, 2011 and 2013.

This ability will be useful if the market corrects from the current levels.

Among large-cap peers, the fund has consistently figured in the top quartiles.

Less-volatile large-cap stocks dominate the fund’s portfolio, making up more than 90 per cent of its corpus — this lends the fund much stability.

But in raging bull markets, its performance does not keep up with multi-cap funds and some peers such as DSP BR Equity Fund due to their lesser large-cap exposure.

Birla Sunlife Frontline Equity Fund has been quick on its feet, increasing exposure to cyclical sectors such as banks and autos since August 2013, when the bull-run had just started; this has held the fund in good stead.

It has also benefited from smart stock picks such as Bajaj Finance and YES Bank which nearly tripled last year.

Paring stakes early in losing commodity stocks such as Cairn India too helped.

There have been some missteps too, such as exiting Bharat Forge, which tripled last year. These, along with low exposure to mid and small-caps (about 5 per cent of portfolio), have led to the fund figuring in the second quartile among peers last year, a notch lower than the first quartile performance over longer time periods.

Over the past three and five years, picks such as Bayer CropScience and Motherson Sumi Systems have gained four-to-eight fold. The fund has remained mostly fully invested in equity and takes cash calls to the tune of about 5 per cent during volatile periods. But it has also been nimble enough to shore up equity exposure in quick time when the tide turns.

Currently, banking stocks account for the largest portion (about 26 per cent) in the portfolio with the chunk (22 per cent) in less vulnerable private banks.