34
HDFC Prudence Fund : Strategy & View
Fund Manager:
Prashant Jain
The fund is a balanced fund that endeavours to provide capital appreciation over a long period of time
from a judicious mix of equity and debt investments. Under normal circumstances, the fund invests
in the range of 40%-75% of its corpus in equity & equity-related instruments and 25%-60% in debt &
moneymarket instruments. Asset allocation between equity and debt largely depends upon valuations,
growth outlook and prevailing interest rate scenario. The equity part of the portfolio is managed as
flexi cap strategy, comprising of large, mid and small cap stocks. The fund manager invests in quality
companies with superior growth prospects and are available at reasonable valuations. The debt part
of the portfolio is actively managed based on the interest rate outlook over the next 2-3 years period.
Securities are selected after assessing credit, interest rate and liquidity risk. The fund invests in
debt instruments such as government securities, securitized debt, corporate debentures and bonds,
quasi-government bonds and money market instruments. As per the fund manager, the Union Budget
for FY18 was fiscally prudent as it targeted to maintain the fiscal deficit without compromising on
investment requirements. The budget mainly emphasized to curb the informal economy, improve tax
compliance and widening of tax base, infrastructure development, higher rural income and digitization
to boost the structural economic growth over long term. Further, the impact of higher infra allocation
and several measures taken by the government over the last two years is expected to be seen from
FY18 onwards. The fund manager believes that lower interest rates, improving growth prospects
of the economy and signs of improving corporate profitability creates positive outlook for equity
markets. Hence any volatility in Indian equities induced by global events at a time when the Indian
economy is improving on nearly all parameters will be a good opportunity for investors with long term
perspective. The fund manager is bullish on Banks & Financial Services and has highest exposure in
it. Apart from Banking, the other top sectoral holdings are Construction, Oil & Gas, IT and Auto & Auto
Ancillaries. Currently, the fund has around 74% exposure in equity and around 26% exposure in debt
& cash. Within equity, the fund has around 53% exposure in large cap stocks and 22% exposure in
mid & small cap stocks. The debt portfolio of the fund has an average maturity of 11.93 years. The
fund is recommended for moderate & aggressive investors with an investment horizon of 2-3 years.
ICICI Prudential Balanced Fund : Strategy & View
Fund Manager:
S Naren, Manish Banthia and Atul Patel
The fund is a balanced fund that aims to provide capital appreciation to the investors by using
equity and fixed income instruments. The fund uses an in-house model of Price to Book Value
(P/BV) in which current market levels are compared to the fair value range to determine under
or over valuations of the market. The fund endeavours to maintain an equity allocation in the
range of 65% to 80% based on prevailing market valuations. A lower price to book value than
the fair value range triggers an increase in equity levels and vice versa. The equity part of the
portfolio is maintained as flexi cap strategy and invests into large and mid cap stocks, depending
upon the prevailing market scenarios. The debt portion of portfolio is actively managed and
invests in securities which offer reasonable accrual with credit rating of AA and above. The
fund also takes tactical allocation to longer maturity papers depending upon prevailing interest
rate scenario. As per the fund manager, the government has taken balanced approach in the
Union Budget for FY18 by focusing on need for higher infrastructure spending while maintaining
the fiscal consolidation. The fiscal deficit has been budgeted at 3.2% of GDP (Gross Domestic
Product) in FY18 with a target of achieving 3% of GDP in FY19. Further, the government also
emphasized to bring transparency in the economy, converge informal economy to mainstream
economy, improve tax compliance, rural income and digitization. The fund manager is of the
view that corporate earnings are likely to revive on the back of rise in consumption demand and
improvement in capacity utilization which, in turn, would contribute to increase in profitability.
This would also help the corporates to deleverage their balance sheet and reduce the interest
cost. The fund manager believes that savings are likely to move from physical assets to financial
assets in the backdrop of muted performances by gold and real estate asset classes and due
to lower interest rates on deposits. This is likely to support the equity market growth over the
medium to long term. The fund has highest exposure in Banks & Finance. Apart from Banking,
the other top sectoral holdings are IT, Oil & Gas, Pharma and Telecom. Currently, the fund has
around 66% exposure in equity and around 34% exposure in debt & cash. Within equity, the
fund has around 59% exposure in large cap stocks and around 7% exposure in mid & small
cap stocks. The debt portfolio of the fund has an average maturity of 4.95 years. The fund is
recommended for moderate & aggressive investors with an investment horizon of 2-3 years.
M
utual
F
und
S
ynopsis
- E
quity
F
unds
as
on
31
st
J
anuary
, 2017
Source for entire data stated above is ICRA Online Ltd. (For Disclaimer of ICRA Online Ltd, refer
Top Holdings as on 31st January 2017
Company
%
Bharti Airtel Ltd.
5.06
ICICI Bank Ltd.
4.42
Tata Chemicals Ltd.
3.94
Infosys Ltd.
3.81
HDFC Bank Ltd.
3.43
Total
20.66
Sector
%
Banks & Finance
14.17
IT
9.65
Oil & Gas, Energy
9.33
Pharma
6.31
Telecom
5.06
Total
44.52
Debt & Cash
33.61
Top Holdings as on 31st January 2017
Company
%
State Bank of India
6.86
Larsen & Toubro Ltd.
6.74
ICICI Bank Ltd.
6.39
Infosys Ltd.
4.38
Tata Steel Ltd.
3.41
Total
27.78
Sector
%
Banks & Finance
20.71
Housing & Construction
8.64
Oil & Gas, Energy
8.04
IT
7.25
Auto & Auto Ancillaries
6.59
Total
51.24
Debt & Cash
25.60
