Monday, September 09, 2013



September 2013

It would be rare to find an investor who is unmoved even after the recent fall in Indian equity indices. Considering the dire state of India’s economy, falling equities should not surprise investors but the manner in which they are shunned nowadays, is worrisome even for an experienced investor. Besides, rupee is hitting fresh lows every day sending shivers down the spine of investors. Measures taken by the RBI and the government have fallen flat. Under such difficult circumstances, it is heartening to know that the five GEMs of September 2012 have retained their esteemed status by virtue of their consistent performance and they continue to occupy the coveted position  in the September 2013 GEMGAZE.


HDFC Equity Fund Gem

A long-term bet

HDFC Equity definitely boasts a long experience having faced both the bullish and the bearish phases in its 16-year-long journey. It is predominantly a large-cap oriented, actively managed, diversified equity fund. With net assets of Rs. 10,824 crore, the one-year return of HDFC Equity has been 1.71% as against the category average of 4.85%. Finance, energy, and technology are the top three sectors constituting 56% of the total assets in the portfolio. The fund follows a multi-cap approach, with an affinity for large cap companies, with 68% of the fund’s assets invested in large cap stocks. This allows the fund to keep volatility in check, while at the same time garnering better returns from its exposure to mid and small cap companies in a mature bull run. The fund follows a concentrated investment strategy, and maintains consistency in its holdings. It remains fully invested most of the time and does not resort to high cash exposure during market downturns. In the past 3 years, its equity allocation has been above 95%. The key take away from the portfolio is its disciplined investment management and consistency in management, with Prashant Jain managing the portfolio since the scheme’s inception. The fund has given stupendous returns of 21% per annum since inception and its past 3 year and 5 year returns stand at 7% p.a. and 10% p.a. respectively, while the market has gone nowhere in the past 5 years. The 10-year Systematic Investment Plan (SIP) has given returns of about 24% p.a. Disciplined Systematic Investment in this fund has certainly generated very good returns, for passive investors. For active investors, investments in this fund when markets are down sharply or during bearish phases will give spectacular returns. It is one of the best funds to be in, for the long term.

Sundaram Midcap Fund Gem

A leader in the midcap space

A mid-cap fund must be an integral component of every intelligent equity portfolio to boost the overall returns. Its acclaimed track record makes a robust case for Sundaram Select MidCap. It is a class-leading fund tracking the mid-cap space with a diversified and growth approach. Sundaram Midcap Fund sports net assets of Rs 1804 crores. 44% of the assets are invested in sectors such as finance, healthcare, and engineering. The top ten stocks in the portfolio account for 46% of the assets. The one-year return of the fund is –4.17% as against the category average of –2.75%. Its three-year and five-year returns are –3.58% and 9.33% as against the category average of –4.55% and 6.78% respectively. The compounded annual return of 28.6% since launch in July 2002 outpaces the S&P BSE Mid Cap Index by 10.4 percentage points on a compounded annualized basis. 10,000 invested in Select Mid Cap at launch would have grown to Rs. 1,55,919 as of June 30, 2013. The fund is managed with a clear investment philosophy emphasizing on bottom up approach leveraging on strong in-house research capabilities to identify winners. It invests in companies with scalable businesses, sustainable competitive advantage, and strong operating cash flows.  Many stocks have been held for more than 5 years and have now become large caps, say for example, IndusInd Bank and United Spirits. The fund is well diversified across key growth sectors spread across Agriculture, Services, and Manufacturing (Financial Services, Consumer Goods, Automobile, Pharma, Industrial Manufacturing, and IT).

ICICI Prudential Dynamic Fund Gem
A dynamic yet consistent performer

ICICI Prudential Dynamic Plan is an open-ended Diversified Equity Fund that aims to make the most of market changes. Given the dynamic nature of the markets, the fund has the ability to attack by taking aggressive asset calls in equity and equity related securities. On the flip side it may also adopt a defensive strategy by investing in debt, money market instruments and derivatives as and when markets get overvalued. This fund adopts a "Bottom-up" fundamental analysis strategy across market capitalizations on a diversified basis, to identify and pick its investments. The fund manager has the discretion to take aggressive or defensive asset calls, based on market conditions. With net assets of Rs 3,572 crore, the one-year return of ICICI Prudential Dynamic Fund is 9.71% as against the category average of 4.85%. The returns since launch have been 25.26%. The top ten stocks accounted for close to 44% of the assets invested in equity. The top three preferred sectors are energy, finance, and technology, constituting 43% of the total assets in the portfolio. 67% of the assets are large caps. It could be an ideal product in a volatile environment as it has the agility, aimed at capturing upside opportunities in the market across market capitalizations. On the flip side, it has the ability to switch to cash; thus seeking to limit the downside, in case stock markets get into an overvalued position. Its long-term results reflect consistent performance as its 5-year annualised returns of 7.64% are slightly better than the category average of 5.19%. All this has helped it emerge as the second-largest fund in its category.

DSP Blackrock Equity Fund Gem
A temporary lull?

DSP Black Rock Equity Fund is a diversified equity fund with assets under management of Rs 2,180 crore. Its one-year return is –2.2% as against the category average of 2.7%. The top three sectors technology, finance, and energy constitute 47% of the portfolio. Exposure to the top 10 stocks is currently at 49%. Large caps constitute 61% of the portfolio. It has been an out performer for a long time but its recent performance has not been spectacular. It had a good run from 2003 to 2009 when it was consistently in first or second quartile. In the past few years its returns have been marginally above its peers and its benchmark, S&P CNX 500.  This fund has the ability to achieve consistent risk-adjusted returns across market cycles and has the potential to handsomely reward investors staying for the long-term. A well-diversified portfolio of quality stocks helps this fund maintain its performance edge irrespective of the market movement. This fund adopts a top-down approach by evaluating economic trends and analysing various sectors before it invests in both value and growth stocks. In its history of 14 years, this fund has under performed the category average only on three occasions, making it a compelling pick.

Birla Sunlife Frontline Equity Fund Gem
Performance through thick and thin

Birla Sunlife Frontline Equity Fund, with net assets of Rs. 3180 crore is among the handful of equity funds with over a decade’s track record. While quite a few funds with such a record have fallen by the way side, this fund managed to chug along well, keeping itself in the top quartile of the performance chart. Its one-year return is 12.09% as against the category average of 4.85%. Its three-year and five-year returns of 2.3% and 10.82% surpass the category average of –1.53% and 7.04% respectively. The top three sectors of finance, technology, and energy constitute 50% of the portfolio. Top 10 holdings constitute 40% of the portfolio. 72% of the portfolio is in large caps. This large-cap focused fund delivered 15% annually in the last 5 years, convincingly beating its benchmark S&P BSE 200 by a good 6 percentage points. Its ten-year annual return at 22% beats its benchmark BSE 200 by a good 5 percentage points. Over the one, three and five-year timeframes, the fund has soundly beaten the BSE 200 by a margin of four to six percentage points. Over the past ten years, the fund has bettered its benchmark a whopping 92% of the time on a yearly rolling return basis. It is this consistency and the ability to contain losses that make it an attractive fund today. A long record of good performance across market cycles, a blue-chip bias, and deft juggling of sectors make Birla Sun Life Frontline Equity suitable for an investor’s core portfolio.

No comments: