This fund has an aggressive stock-picking style, but with a careful eye on risk control. Associated largely with large-caps, it rarely chases small and mid-caps. No wonder Prudential ICICI Growth has been going through a rough patch this year. It has consistently underperformed its category average -- its trailing 3-month return of –7.86% being an eyesore before the category's –3.29%. Defends CIO Dileep Madgavkar: ''When only small/mid-cap stocks perform -- as has been seen recently -- the fund will underperform due to the caps on picking such stocks.''
Don't lose heart as the fund (it tails Nifty) holds promise to deliver good returns in the long term owing to diversification and its good picks. Its trailing 3-year return towers over the category. In the short term though, the fund may not do anything spectacular but during a secular bull-run, it has the potential to generate good returns.
Since launch in 1999, this fund's aim has always been to see capital appreciate. In the first year itself, it made a killing, clocking a whopping 188.15% return. But between March 2000 and March 2001, the tech meltdown sucked it dry, owing to its tech-heavy positioning (about 50% in March 2000). Badly burnt, the fund was down –45.85%.
On account of the tech injury, the fund was forced to prune its IT exposure, and move towards diversification. Ever since, its tech stake has been averaging around 18% (though in November 2001 it was a mere 4%) but in March this year the fund hiked exposure to over 23%. It claims that it abides by SEBI's prescribed 10% limit for an individual stock. A sloppy equity environ in the recent past has resulted in the fund adopting a cautious stance through diversification. The fund's buy-and-hold strategy has helped it guard the downside well. At the same time, during the PSU rally, the fund booked reasonable gains.
This fund which intends to maintain a middle path in terms of risk-return pay off, is not a short-term pick. If you are shooting for stars, look elsewhere as this fund is meant for investors committed to patient investing.
This article was originally published on June 27, 2002.
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