Dream run for ICICI equity funds

Written by Ashley Coutinho | Ashley Coutinho | Mumbai | Updated: Mar 30 2014, 17:33pm hrs
ICICIICICI Prudential Top 100 Inst I emerged the top large-cap scheme for the one-year period, with returns of 26.45%. Reuters
In a year when midcap funds dominated the proceedings and benchmark indices remained volatile, a few large-cap funds have proved their mettle, handsomely beating returns of their underlying benchmarks.

ICICI Prudential Top 100 Inst I emerged the top large-cap scheme for the one-year period, with returns of 26.45%, beating CNX Niftys benchmark returns of 17.75% by a wide margin, data collated from mutual fund tracker Value Research shows. Motilal Oswal MOSt Shares M50 ETF was the second-best performer with returns of 25.36%.

It has been a dream run for ICICI Prudential MF, with four of its schemes featuring among the top 10 performers. These include ICICI Prudential Focused Bluechip Equity Inst I (23.75%), ICICI Prudential Target Returns Reg (23.33%) and ICICI Prudential Indo Asia Equity Direct (20.97%). These four schemes manage about R5,300 crore by way of assets.

BOI AXA Equity Reg Direct (21.45%), UTI Equity Direct (21.11%), BOI AXA Equity Eco (21.04%) and HDFC Index Sensex Direct (20.26%) were some other top performers for the one-year period.

The uptick in the market has helped large-cap funds. Schemes that have invested in growth-oriented stocks and that have avoided concentration on few sectors or themes have outperformed, said Sameer Hassija, senior investment analyst, Morningstar India. He added that the focus on growth stocks has particularly helped boost the performance of some of ICICI Prudential MFs schemes.

Growth stocks are typically associated with high-quality companies trading high price-to-earnings (P/E) ratios and high price-to-book ratios whose earnings are expected to continue growing at an above-average rate relative to the market. Value stocks tend to trade at a lower price relative to their fundamentals, but they may have fallen out of favour in the market.

HDFC Top 200, one of the flagship schemes of HDFC MF that had been struggling in FY13, has made a comeback of sorts in recent months, thanks to its robust performance in the past six months. The scheme was the best performer during the period with returns of 20.9%, beating S&P BSE 200s benchmark returns of 14.13%.

Its also the third-best performing scheme in the three-month period, with returns of 5.88%. HDFC Top 200s assets under management is R10,546 crore.

Notably, top diversified equity mutual funds had a rough run in CY13 with half of the funds underperforming the benchmarks owing to sustained volatility and a lack of directional trend in the market. The underperformers included large-cap schemes such as HDFC Top 200, Reliance Equity Opportunities, Franklin India Bluechip and DSPBR Top 100 Equity Reg.

The other two top performers for the six-month period are Motilal Oswal MOSt Shares M50 ETF (19.3%) and LIC Nomura MF Equity Direct (17.98%). Incidentally, three ICICI Prudential MF schemes also feature among the top 10 best performing schemes for the six-month period.

In the past three months, HSBC Equity Direct (6.09%) and UTI Leadership Equity Direct (5.89%) emerged the two top performers.

Despite their stellar performance, experts caution that one year is too short a time horizon to judge the performance of a scheme. The fund manager may have got lucky or the sectors he is overweight on may have done well during the year, said Hassija. An investor should look at five-year returns at least, ideally looking at five-year rolling period, calendar year and trailing year returns. Only if the scheme consistently features in the top quartile can he be sure that the fund manager is consistent and sticking to the right stock-picking strategy.

The benchmark 30-share BSE Sensex has given returns of 5.41%, 13.24% and 18.60% for three months, six months and one year, respectively. On the other hand, the broader 50-share Nifty has given returns of 6.05%, 14.78% and 17.83%, respectively, during the same period.