Though the recent performance has not been too impressive, don’t write it off. The numbers are pretty middle-of-the-road when compared with the category average but it has beaten the benchmark, S&P CNX 500.
The fund had a great run for a number of years. It handled the downturn of 2008 very well and despite the change in market direction catching the fund manager on the wrong foot in 2009, he managed to steady himself and reposition the portfolio to a growth orientation. By upping the equity exposure and reducing allocation to defensives like FMCG and Healthcare, he impressed that year too.
In the past two years, the fund’s performance has been more or less average. “The sectors which significantly impacted our fund’s performance included Industrials, Materials and Telecom. Our strategy to be overweight in the Agricultural sector was ill-timed as key reforms we had expected to go through did not materialize,” explains Shah. “However, we are bullish on the Agricultural sector as we do believe that the gain in food productivity will be a critical focus area in India.”
The number of stocks ranges between 68 and 83 (1-year average), the highest number held by any fund in this category. Allocation to a single stock does not exceed 5 per cent, barring few large caps. However, the fund holds a long tail of stocks (currently around 84) that have an allocation of less than 1 per cent. The reason being that this portfolio is a combination of two portfolios: DSPBR Top 100 Equity and DSPBR Small & Mid Cap.
Though this strategy results in a rigorously diversified offering, Shah believes that this portfolio captures the different segments of the economy.
The portfolio is actively churned and the turnover ratio is amongst the highest in this category. Shah attributes that to high market volatility and claims to do so mainly on the large cap side of the portfolio and adopts a more or less buy-and-hold strategy for the smaller fare. Over the 5- and 10-year periods (January 31, 2012), this fund features amongst the top five performers. In its existence of 14 years, it has outperformed its benchmark in 11.
This article was originally published on February 23, 2012.
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