Given its performance so far, ICICI Prudential Focused Bluechip Equity Fund looks to be a good investment option
THE year 2008 was one of the challenging years for the equity market when most market players preferred to take refuge in cash or gold rather than investing in equities. However, those who dared to invest in equities then are today reaping the fruits of their endurance. ICICI Prudential Focused Bluechip Equity is one such fund, which was launched in May 2008, could not have taken place at a better time. Notwithstanding the faint initial response, the scheme boasts an asset size of over 1,600 crore and has rewarded its initial investors handsomely over this period of two-and-a-half years.
PERFORMANCE:
As its name suggests, the scheme focuses on some of the finest Bluechip Nifty stocks and thus has reaped the benefits of stupendous recovery seen in the large-cap segment after the market meltdown in 2008. Having acquired most of its equity investments at discounted rates in the second half of 2008, ICICI Prudential Focused Bluechip Equity delivered 91% returns in 2009 as against 76% returns by its benchmark index — the Nifty. Since its inception in May 2008, the scheme has enriched its investors by more than 60% (absolute) gains, i.e., every 100 invested in this scheme in May 2008 is worth more than 160 today.
PORTFOLIO:
The fund began with the investment objective of investing in just about 20 stocks till the time it attained at least 1,000 crore of AUM. Though it has crossed the threshold AUM, the fund is still following the strategy. The fund has retained nearly 40% of its total investments for over two years. These include stocks like ICICI Bank, ITC, Bhel, L&T and Infosys Technologies to name a few which the fund could manage to pocket at fairly discounted rates in 2008. Similarly, the fund was also proactive in investing in some of the fine blue chips in 2009 at attractive valuations. These include stocks like Bajaj Auto, Axis Bank, Bank of Baroda, Punjab National Bank, TCS and Hindustan Zinc.
The fund has added HDFC Bank and Grasim Industries to its portfolio. On the sectoral front, it is bullish on financial services with over 27% of its portfolio dedicated to the sector alone. Within the financial services sector, it has allocated over 14% to private sector banking space. A major concern about the fund's portfolio is, however, the limited number of stocks that it currently holds that increases its risk per stock holding. The fund manager should evaluate the possibility of increasing the number of stocks, now that the fund commands more than 1,600 crore of asset base.
OUR VIEW:
Large-cap funds are considered to be relatively safe investments within the mutual fund space and thus recommended for risk averse investors. Given its performance so far, ICICI Prudential Focused Bluechip Equity Fund can be recommended as an investment option. While the existing investors may continue to hold their investment in this fund, new investors should make some considerations before taking an investment decision. The fund's performance is the outcome of fine stock picking at discounted rates, which may not recur in near term. Hence, the fund's ability to perform better even in future is what one needs to watch for, now that most of its large-cap holdings are either trading at decent valuations or are overvalued. As such, the fund is just two-and a-half-year old and needs to prove its mettle even in the downturns.
