DSP BlackRock Small and Midcap Equity Fund has been generously rewarding its investors since last year and is running high on confidence
0SINCE the revival of the equity markets over the past one year, it is the small and the midcap stocks that have outperformed the broader market. Even as the Sensex and the Nifty gained about 56% and 51%, respectively, in the past one year, the BSE Midcap and Smallcap surged by 96% and 119%, respectively during the period. No wonder that most small and midcap-oriented mutual funds have delighted their investors with extremely generous returns and have beaten the funds that played safe and maintained a large exposure in large cap stocks. The DSP BlackRock Small and Midcap equity fund has been one of front-runner in its category and is running high on confidence these days.
PERFORMANCE:
For a small and midcap fund, a launch in 2006-07 would have ideally meant a strong performance right from the start. However, for DSP BlackRock Equity, success has come gradually over a period of time.
Despite catering to small and midcap equities, the fund's returns of about 55% in 2007 could match only that of the Sensex and the Nifty but not that of its benchmark index — the CNX Midcap, which delivered nearly 77% then.
In 2008, however, the fall for the fund was as gruesome as it was for its benchmark index. All its earnings of 2007 were completely washed off as it fell by a whopping 59% during the financial crisis, which had cost Sensex and Nifty a loss of about 52% each and a loss of more than 59% to the CNX Midcap index.
However, just when investors would have probably written off this fund from their investment mandate, considering its two-year performance, it made a dramatic recovery.
The year 2009 saw the fund gain nearly 119%, beating not only the Sensex and the Nifty but also the 99% returns of the CNX Midcap index by huge margins. Thus, those who invested in the fund in early 2007 have easily made an absolute gain of over 50% during this period of over two years.
Even in the current calendar year, the fund's performance can be easily aligned to its benchmark index with both having returned around 7% each since January this year. The Sensex and the Nifty have gained just about 2% since then.
PORTFOLIO:
With more than 60 stocks in its portfolio, DSP BlackRock Small & Midcap Fund is well diversified across various sectors, with companies in the services sector, healthcare and FMCG space accounting for maximum exposure. This appears quite opportunistic since healthcare and FMCG stocks have done extremely well in the past year. Also, this sectoral preference is quite unlike most other equity mutual funds that prefer highest exposure in the financials and energy sectors.
Within the healthcare space, the fund has invested into Cadila Healthcare, Torrent Pharma, Fresenius Kabi Oncology, Lupin and Panacea Biotec among others and has earned good returns on each of these stocks. As such, the fund is currently running an extremely profitable portfolio with nearly 82% of its equity holdings currently quoting a price higher than the cost of investment. As far as the fund's portfolio management is concerned, it appears to be actively managed, churning stocks at frequent intervals.
The fund has made opportunistic investment in 2008, mid 2009 and recently added stocks like Federal Bank, Oriental Bank of Commerce, United Breweries, Bharat Forge, Hyderabad Industries, Gujarat Alkalies and Man Infra Construction among others in its portfolio.
Moreover, by diversifying its total portfolio assets under management (AUM) of over Rs 750 crore to more than 60 stocks, the fund has restricted its exposure and thereby the risk per stock to less than 5%.
DSP BlackRock Small & Midcap Equity Fund's performance in the current bullrun has been a delight to its investors. While this proves the fund's ability to successfully ride a bull-rally, the fund manager has still pass the test of cushioning the hit to investors during a market downturn. Those looking forward to invest in this fund would, however, do well to understand the risk of investing in a midcap fund before taking a call.
