Thursday, December 31, 2015

SBI Blue Chip: A stellar large-cap fund

Both the Sensex and the Nifty have plunged around 7 per cent so far this year. From the March peak, they have declined 14.5 per cent. Given this choppiness, investors with a moderate risk appetite can take exposure to large-cap-oriented funds. These funds contain downside risks well.

Investors with a long-term horizon can consider the SBI Blue Chip, a good pick in this category. The fund has outperformed its benchmark BSE 100 as well as its peers, such as Birla Sun Life Top 100, DSPBR Top 100, Franklin India Bluechip and UTI Top 100 over the past one-, three- and five-year periods. Moreover, the fund has outperformed its benchmark with big margins of 7-12 percentage points over one-, three- and five-year periods.

The fund is among the top 10 in the large-cap category for these time periods. The good show has also been consistent with the fund delivering superior returns over the benchmark index 97 per cent of the time on an annual rolling return basis over the last three years. In view of the current market choppiness, investors can avoid taking lumpsum exposures and invest via systematic investment plans.

Portfolio and strategy

After muted performance in 2010 and 2011, the fund beaten the BSE 100 returns in subsequent years. This good show continued in 2015 as well, with the fund managing almost 7 per cent returns so far this year, even as the Sensex and the Nifty are in negative territory.

The fund invests predominately in large-cap companies with market capitalisation of Rs.10,000 crore and above at any point in time. Like others in the category, it takes some exposure to mid-cap stocks, limited to a maximum of 20 per cent of its assets. The fund had seen its equity allocations swing between 82 and 97 per cent; during January 2015, its allocation was tilted towards the upper side of the range. However, as market conditions deteriorated, it slashed the allocation to the lower level of the range.

On the other hand, the fund has reduced taking cash calls; it now appears to be moving towards debt. Its current holding in the debt segment is 14.7 per cent, signalling a safe bet. There is marginal exposure to the derivatives segment.

The fund is overweight on the pharma, construction and engineering sectors, compared with its benchmark weightage. Conversely, it is underweight in financials and software.

Cyclicals, such as cement and petroleum do share high sector allocations.

Reliance Industries re-entered the portfolio in March this year The stock has delivered 20 per cent returns from March end. Mahindra & Mahindra and Voltas, which are performing well, are the other stocks that the fund has exposure to in recent times. This indicates that the fund bets on growth stocks.

It exited out of Axis Bank and Federal Bank recently. It has around 47 stocks with low churning of portfolio.

HDFC Bank, Reliance Industries, Infosys, Sun Pharmaceutical Industries and Maruti Suzuki India are the top stock holdings.

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