DSP BlackRock Top 100 (DBT): In 2015, it had exited Mint50. Now it’s back, as it has quietly turned around. While its 2016 return of 4.89% looks less, it finished in the top quintile and beat its benchmark index S&P BSE 100, which returned 3.57%. After Harish Zaveri took over from Apoorva Shah as fund manager, churning reduced. Zaveri repositioned so that the fund wasn’t dependent on industrial recovery. “Instead, I wanted visibility in earnings in my holdings,” said Zaveri. Now, he foresees an economic recovery and hence the portfolio includes stocks like State Bank of India, Bank of Baroda and Larsen & Toubro Ltd.
IDFC Classic Equity Fund (ICE): Ignore its distant past. For all the possible 3-year time periods between September 2006 and present (30 periods) that we considered, ICE figured in the bottom quintile of multi-cap funds 25 times. It outperformed its benchmark index, S&P BSE 200, only 11 times. Why ICE then?
When Anoop Bhaskar took over as head of equities at IDFC Asset Management Co. Ltd in 2016, he felt the need to stress on benchmark indices and codify how each scheme is managed. “We aim to invest in companies that generate free cash flows to such an extent that it can fund a company’s future growth requirements,” he said. ICE’s allocation to small-cap scrips has reduced, allocation to large-sized companies has increased. ICE is now more diversified and the percentage of top 10 scrips has gone down to about 30% from around 45% throughout 2015.
L&T India Value Fund (LIV): Although LIV falls in the mid-cap category—as per Value Research’s classification—it follows a multi-cap strategy. LIV has shares of State Bank of India and ICICI Bank. Venugopal Manghat, fund manager of LIV, feels that the worst for the state-owned banks is over, but he is wary of small- and medium-enterprises segment, after the demonetization scare.
As LIV follows a value approach to picking stocks, valuation is important. “There could be companies where a turnaround is expected. There could be sectors with tailwinds (market forces pushing for its growth),” he said.
ICICI Prudential Balanced Fund (IPB): S. Naren, executive director and chief investment officer, ICICI Prudential Asset Management Co., manages the fund along with Manish Banthia, senior fund manager. Long-term track record and stable risk measures make IPB a suitable candidate for Mint50. The equity portion of the fund is actively managed, with a mix of large- and mid-cap stocks. The debt portfolio’s duration too is actively managed, but IPB also uses an accrual strategy by focusing on high-quality bonds. Naren said, “While the funds looks at a blend of large- and mid-cap stocks, currently the fund is more inclined towards large-cap stocks. We do not take many sector calls unless bottom up ideas fit in.” Having a high duration portfolio helped, as did underweight equity positions in banking, technology and capital goods sectors. The fund managers will now reduce duration.
Franklin India Smaller Companies Fund (FIS): Although the scheme invests in mid- and small-companies, it aims to invest 45-50% of its corpus in the latter. R. Jankiraman has been its fund manager since 2008. “Companies’ return on capital should be consistently higher than the cost of capital; they should not be capital-intensive and should be able to generate stable, free cash flows,” said Jankiraman. FIS has a low turnover. To overcome the lack of liquidity in the small- and mid-cap firms, it invests around 20% in a combination of large-sized companies and cash.