FUND PICK: DSP BlackRock Micro Cap Fund

Delivering higher returns from smaller stocks

Launched in June, 2007, DSP BlackRock Micro Cap Fund is classified under the small and mid-cap category of the CRISIL Mutual Fund Ranking. It has been ranked in the top 30 percentile (CRISIL Fund Rank 1 or 2) over the past eight consecutive quarters ended June 2016. The fund seeks to generate long-term capital appreciation from a portfolio that is substantially constituted of equity and equity-related securities, which are not part of the top 300 companies by market capitalisation. Vinit Sambre (since June 2010) and Jay Kothari (March 2013) are managing the fund, which had Rs 2,680 crore of quarterly average assets under management as at the end of June 2016 quarter.

Superior performance
The fund has consistently bettered its category (funds ranked under the small and mid-cap category in June 2016 CRISIL Mutual Fund Ranking) and the benchmark S&P BSE Small Cap for all trailing periods. The recent three-year performance was particularly notable with annualised returns of 53.74 per cent compared with 40.37 per cent and 33.68 per cent by the category and the benchmark, respectively.

Since April 2009, the fund has delivered higher returns than the category and the benchmark across various market rallies and downswings. The fund performed very well during the post subprime crisis phase (April 2009 - December 2010) with 7.99 per cent CAGR returns.

During the subprime crisis phase (December 2007-March 2009) and the European crisis phase (January 2010-June 2013), the fund managed to mitigate the downside compared with the benchmark.

An investment of Rs 1,000 in the fund since inception would have grown to Rs 5,019 by August 2016 at an annualised rate of 19.19 per cent. A similar amount invested in the category and the benchmark would have grown to Rs 3,745 at 15.45 per cent and Rs 1,702 at 5.96 per cent, respectively.

Had an investor initiated a systematic investment plan (SIP) of Rs 1,000 per month in the fund since inception, the investment amount of Rs 1,11,000 would have grown to Rs 3,93,176 by August 19, 2016 at 26.21 per cent annualised returns. In comparison, a similar amount invested in the benchmark would have only returned Rs 1,86,837 at 10.97 per cent.

Portfolio analysis
As of July 2016, the fund had exposure to 65 stocks across 22 sectors.

Over the past three years ended July 2016, the top five sectors constituted 46.66 per cent of the fund's total portfolio. Over this period, the portfolio was weighted towards the textile products sector with 9.23 per cent average exposure followed by pharmaceuticals (8.95 per cent), finance (8.44 per cent), chemicals (8.21 per cent) and industrial product sector (7.98 per cent).

The fund has consistently held 17 stocks in its portfolio for the past three years. The average exposure of these stocks accounts for 36.54 per cent of the total portfolio.

Top holdings among the consistently-held stocks include Indoco Remedies with average exposure of 5.07 per cent followed by Solar Industries India (3.07 per cent), Symphony (2.93 per cent), NIIT Technologies (2.74 per cent) and Development Credit Bank (2.73 per cent).