The markets have been making fresh highs in recent weeks and the bull-run appears very much intact even as concerns increase about elevated valuations. While the mid- and small-cap segments have had a runaway rally over the past year or so, there is still some comfort in the large-cap space.

At the same time, the momentum in the broader markets may be worth riding on for investors.

In such a situation, a flexi-cap fund with a heavy tilt towards large-caps can be considered by investors.

In this regard, ICICI Prudential Flexicap Fund, which completed three years recently, may be a healthy bet for investors with a long-term perspective. The fund has performed quite well in the limited period that it has been around.

Taking the systematic investment plan (SIP) route may be advisable, preferably to coincide with specific financial goals.

Healthy outperformance

ICICI Prudential Flexicap’s performance over the past three years places it in the top-quartile of its category.

Over the past one-year, two-year and three-year periods, the fund has delivered 45.1 per cent, 31.2 per cent and 24.6 per cent, respectively on a point-to-point basis. This performance places it among the top few funds in the category. The scheme outperformed the BSE 500 TRI by 3-7 percentage points.

When one-year rolling returns over the past three years (July 2021-2024) are considered, ICICI Prudential Flexicap has delivered mean returns of 21.6 per cent.

Also, in the three-year period mentioned above, on a one-year rolling basis, the scheme has beaten its benchmark BSE 500 TRI almost always (99.7 per cent of the time). It has delivered more than 15 per cent over 58 per cent time over this period and more than 12 per cent nearly 71 per cent of the time.

The fund’s SIP returns (XIRR) over the past three years are fairly robust at 31.8 per cent. An SIP in its benchmark BSE 500 TRI would have returned 27.3 per cent over this period.

All return figures pertain to the direct plan of ICICI Prudential Flexicap.

The fund has an upside capture ratio of nearly 93.6, indicating that its NAV rises less than the benchmark during rallies. But more importantly, it has a downside capture ratio of 61.9, indicating that the scheme’s NAV falls a lot less than the BSE 500 TRI during corrections. A score of 100 indicates that a fund performs in line with its benchmark. This is based on data from July 2021-2023.

Large-cap bias

ICICI Prudential Flexicap has maintained a bias for large-cap stocks in its portfolio. In general, 65-77 per cent of the portfolio comprises large-cap stocks, lending a fair bit of stability to the portfolio.

The fund has increased exposure to small-cap stocks, which is at 19.4 per cent of the portfolio in the recent June 2024 holdings.

Overall, by having a well-blended market capitalisation, the fund has been able to gain from the broader market rally over the past few years.

ICICI Prudential Flexicap combines both value and growth styles of investing in its choice of sectors and stocks.

Banks and automobiles have always been among the top sectors held by the fund. Automobiles have had a solid run in the past few years without turning overly expensive, while banks have been relatively lukewarm in terms of performance and have a fair degree of value comfort.

After increasing exposure to software companies last year, the fund has subsequently trimmed exposure, even though rally has been modest in these stocks as the growth outlook still remains uncertain.

In recent months, the fund has upped stakes in retail firms. It has chosen leaders such as Avenue Supermarts and Trent.

Mid- and small-cap exposure is in sectors where there is limited availability of large-cap stocks such as auto components, industrial products, wealth management etc.

Th fund takes concentrated exposure to the top few stocks. The top 10 stocks account for over 50 per cent of the overall portfolio. The holdings start to get diffused beyond the top 10.

On the whole, the fund would be suitable for those looking for steady long-term outperformance and have an above-average risk appetite. Taking the SIP route would help ride out the volatility and average costs.

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