DSP Blackrock Equity Fund: Invest

>> Sunday, April 5, 2009

Investors can buy the units of DSPBR Equity Fund, considering the fund’s track record in delivering strong returns and its ability to contain downsides quite well during periods of market volatility.

DSPBR Equity invests in stocks across market capitalisation segments — large, mid and small — taking advantage of any particular momentum in the market.

The fund has beaten its benchmark, the Nifty, consistently over a one-, three- and five- year period. Over a five-year period, the fund has delivered a compounded annual return of nearly 21 per cent that places it among the top few funds in the diversified category.

DSPBR Equity may be held as part of the core portfolio of investors, who look to outperform the benchmark during market upswings and protection from heavy downsides during bear markets.

Performance and strategy: The fund has been in existence for nearly 12 years. During the market upswings in 2003, 2005 and 2007, the fund outperformed its benchmark by a huge margin.

Considering DSPBR Equity’s flexi-cap approach, if one were to compare it against the CNX 500 as a benchmark, the former has demonstrated superior performance, a feat not easy to achieve.

During periods of market volatility, especially prolonged ones such as the one in 2004, or the whole of 2008, the fund has managed to protect the fall in its NAV better than its benchmark.

Its track record on short volatile periods is mixed; while it contained downsides in 2007, the same was not possible in 2006.

For investors looking at longer timeframes of at least 3-5 years, either the lump-sum or the systematic investment route may be options, depending on their surplus.

DSPBR Equity has a higher allocation to mid-cap stocks (less than Rs 5,000 crore market capitalisation) compared to funds such as Birla Sun Life Equity and HDFC Growth. The fund now has over 25 per cent of the portfolio invested in such stocks.

During the bull-run of 2003-07, the mid-cap allocation was over 35 per cent, which was one of the reasons for the fund’s good performance as mid-caps made bountiful gains during this period.

A large-cap intensive approach may be desirable in the present environment, as these stocks may be the first to recover when the current market volatility ends. The cash/debt component in the portfolio has been consistently little over 10 per cent , which suggests that the fund prefers to remain invested in equities albeit with large diversity rather than sit on cash and wait for opportunities.

Portfolio: The number of stocks in the portfolio has been trimmed over the last one year. From over 80 stocks over a year ago, the number of stocks in the portfolio in February 2009 is 67.

The diversification in terms of sectors invested is quite high, with as many as 26 of them in the portfolio. Further the fund appears to have adopted a defensive approach in recent times with consumer non-durables, pharmaceuticals and software being among the top few sectors held. - Hindu Business Line.

The fund is managed by Mr Apoorva Shah.