This fund invests in stocks drawn from the companies in the BSE 200 Index as well as 200 largest capitalised companies in India. With equity exposure up to 90 per cent, the fund manages to achieve capital appreciation over time. We like this fund for its solid long-term record and skilled management that makes it the best performer over the past 5-years with an over 23 per cent return.
In the 14-year history of this fund; it has consistently proven itself barring 1999 when the high exposure to FMCG and Healthcare backfired in the Tech-dominated rally. Again, between June 2007 and January 2008, the fund underperformed the markets. In 2006, it was the high exposure to defensive sectors that pulled it down, the fall in 2007 was due to offloading Energy when the sector was going great. Jain also missed the Real Estate and Utilities boom in this period. Jain admits he stayed away from Real Estate because he did not understand the business. While he does like growth and quality, he wouldn’t overpay for growth has been his argument.
In 2008, the fund’s success in standing upright in a bear market, without resorting to debt or high cash levels, was a testimony to the manager’s skill. The large-cap bias and exposure to FMCG and Healthcare restricted the fall to just 45 per cent, around 11 per cent less than BSE 200 and 8 per cent lower than the category average. But it was in 2009 that Jain silenced his critics by outperforming the category by 14 per cent. This was achieved by being overweight in Auto, Banking, where his bet on SBI paid handsomely. He also reduced exposure to Power Utilities and Energy and reduced significant exposure to RIL, which helped boost performance.
A quality portfolio and a manager who sticks to his conviction, irrespective of whoever else is playing the momentum game, is a mark of this fund. Investors may fret occasionally but Jain has a knack of rewarding investors who stick with the fund. The portfolio of 60 stocks is logical given its size.