Birla Sunlife Equity Fund: Invest

K. Venkatasubramanian

Investors can buy the units of Birla Sunlife Equity Fund (Birla Equity), considering its long-term return track record and ability to contain downsides reasonably. On a one-, three- and five-year basis, the fund has managed to outperform its benchmark BSE-200.

Birla Equity’s compounded annual return over a five-year period stands at 16 per cent, placing it among the top quartile of diversified equity funds. The fund adopts a flexi-cap approach to stock selection for generating higher returns during market upswings. However, from having a blend of large and mid-cap stocks in the past, the fund has, in recent months, a portfolio comprising mainly large-cap stocks.

The fund may be suitable for investors who can assimilate high volatility in returns. The SIP (systematic investment plan) route may be more suited for those more averse to volatile movements in their NAVs.

Performance and strategy: Birla Equity has a track record of over 10 years (it was called Allianz Equity Fund before being taken over by Birla Mutual Fund in 2005). The fund invests in stocks across market capitalisation to benefit from market conditions. From having a portfolio where over 35 per cent comprised mid-cap stocks (less than Rs 5,000 crore market capitalisation) in 2007 and 2008, the fund now has little over 10 per cent invested in such stocks. With the market volatility that currently prevails, a large-cap exposure may be well advised, as such stocks might provide better revenue and earnings visibility compared to smaller companies. Such stocks may be the first to turn around in a market recovery.

The cash position in the portfolio has also been hiked substantially. From over 10 per cent in cash a year ago, this has gone up to 25 per cent now. During periods of market downturn such as the extended one in 2008, and during periods of volatility in 2004 and 2007, the fund has managed to contain downsides better than its benchmark. In the boom period in 2007 and 2006, it managed to deliver top-of-the-line returns.

Portfolio: The number of stocks in the fund’s portfolio has been trimmed down considerably over the past year. From 55 stocks a year ago, Birla Equity sports a more compact 41 stocks in its portfolio currently.

Source : The Hindu Business Line