Fund Pick: SBI Blue Chip Fund

SBI Blue Chip Fund has been ranked 1 under CRISIL Mutual Fund Rank for the quarter ended December 2016. It has been ranked in the top 30 percentile (CRISIL Fund Rank 1 or 2) for the past 12 consecutive quarters in the large cap equity category.
 
The fund aims to provide investors with opportunities for long-term growth in capital through an active management of investments in a diversified basket of equity stocks of companies whose market capitalisation is at least equal to or more than the least market capitalised stock of S&P BSE 100 Index. The fund was lauched in February 2006. It is managed by Sohini Adani, and had quarterly average assets under management of Rs 9,522 crore at the end of December quarter.
 
Performance
 
The fund has bettered its benchmark (S&P BSE 100) and the category (funds ranked in the large cap equity category in December 2016 CRISIL Mutual Fund Ranking) over the longer term though it witnessed marginal underperformance in the past one year. It delivered superior returns of 20.83 per cent per annum in three years compared with the benchmar    k's 12.81 per cent and the category's 16.81 per cent, garnering significant margin.
 
The fund has outperformed in all the market phases, except the post-Subprime crisis. It outpaced peers and the benchmark by an alpha of 3.76 per cent and 9.76 per cent, respectively, during post-European crisis. It also surpassed peers and the benchmark during Chinese slowdown, generating positive annualised returns of 7.82 per cent against the category's 4.47 per cent and the benchmark's 2.25 per cent.
 
An investment of Rs 1,000 in the fund since inception would have grown to Rs 3,315 by March 2017 at an annualised rate of 11.39 per cent, marginally less than the category's return of 12.13 per cent. However, it has substantially outperformed the benchmark's growth to Rs 3,049 at 10.55 per cent. A monthly systematic investment plan (SIP) of Rs 1,000 over 10 years would grow to Rs 257,737 (on a principal of Rs 120,000), returning 14.67 per cent p.a. vis-à-vis the benchmark's 10.08 per cent (Rs 201,938).
 
Portfolio analysis
 
The fund focuses on large cap stocks; the exposure averaged 80 per cent of the equity portfolio in the past three years.
 
Its portfolio held 19 sectors, on average, in the past three years. Top five sectors, on average, formed 54.33 per cent of the portfolio. The fund has had the highest exposure to banking (16.98 per cent) followed by software (9.98 per cent), pharmaceuticals (9.91 per cent), consumer non-durables (5.73 per cent) and petroleum products (5.62 per cent). Banking and petroleum sectors have been the top contributors to the fund's performance. The cement sector, despite not being in the top five, contributed significantly to performance owing to handsome returns from The Ramco Cements, UltraTech Cement and Grasim Industries.

 
In the past three years, the fund manager took exposure to an average of 51 stocks, of which 20 were held consistently; 12 of the consistently held stocks outperformed the benchmark. The top five consistently held stocks are HDFC Bank (average exposure of 7.10 per cent), Sun Pharmaceutical (3.53 per cent), Maruti Suzuki (3.44 per cent), Infosys (3.24 per cent) and Larsen & Toubro (2.99 per cent). HDFC Bank and Maruti Suzuki India were among the highest contributors to the performance. The fund has held 37 stocks for two or more than two years of which 23 have outperformed the benchmark. This impressive performance highlights the right conviction of the fund manager.
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