DSP BlackRock Opportunities Fund has a mandate to invest in a diversified portfolio of large- and mid-cap stocks. That said, its share of large-cap stocks has been greater than 65 per cent traditionally. While the fund beat its benchmark, the S&P CNX 500, over three- and five-year periods, it has in recent times underperformed the index.
When compared with peer group funds, too, a few other opportunities funds such as UTI Opportunities, Reliance Opportunities and HSBC Progressive Themes have delivered better returns over the past six months and one year. The fund is at the bottom of the list of funds that have a multi-cap strategy. What were the fund's sector and stock choices?
Sector trends
The fund progressively increased its allocation in its top sector preference, banks, from 13 per cent a year ago to 19 per cent in May. In fact holdings went to as high as 21 per cent in some of the months in 2012. That banks and software sectors found place in the fund’s top sector holdings in any particular period shows that the fund is optimistic on them. It also raised its share in software from 11 to 14 per cent over the past one year.
The fund doubled its holdings in telecom service sector between May and November 2011. However, the fund drastically reduced its allocation in this sector from 9 per cent to 2 per cent. This could have been due to uncertainty in telecom regulations.
Interestingly over the year, the fund completely exited certain sectors but re-entered them. They were construction projects, power, minerals, oil, and consumer durables. Sectors such as pharma, consumer non-durables and petroleum products saw significant churning in their portfolio over the year.
Overall, high exposure to the underperforming banking sector, with excessive churning within the space, besides exposure during the year to the underperforming telecom space, dragged returns. Exposure to oil and power space also hurt. During the year the assets under management fell by 25 per cent to Rs 551 crore. This fall is slightly higher than the dip in net asset value.
Stock Moves
The fund held anywhere between 52 and 62 stocks in the last one year. In the banking space, while it initially preferred private sector banks such as ICICI Bank and HDFC Bank, it also added State Bank of India later. The fund steadily churned its holding in this space. ICICI Bank, for instance, had the highest weight a year ago, but moved out of the top ten by November. It has once again been brought back as the top holding in the fund’s portfolio.
The fund increased its holding in SBI to 4 per cent. This move turned out to be good as the stock outperformed over the last six months delivering 34 per cent returns. ICICI Bank and HDFC Bank gained 21 per cent and 24 per cent respectively in the period. ITC, Bharti Airtel and Karur Vysya Bank were other stocks to move out of the top holdings while Hindustan Unilever and Nestle India were the new entrants over the last twelve months.