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Recommended Portfolios for 2013
February 8, 2013

This article is a brief update on the changes that we have made in our Recommended Portfolios.


Author : Dr. Renu Pothen



Changes in Recommended Portfolios         

Our recommended portfolios were launched for the first time on February 26, 2010. Since then our portfolios have undergone changes depending upon the modifications that we have brought about in our recommended funds list. As far as our asset allocation stance goes, we became neutral on India since November 10, 2010. At that time we felt that the Indian market was overvalued on an absolute and relative basis which forced us to change our stance from over-weight on equities to neutral. We continue to maintain this stance although valuations look attractive because we still have concerns on the macro-economic front.

The biggest saving grace for India, from our point, is the government’s willingness to take responsibility to bring the economy back onto the growth trajectory. We started seeing this ray of hope since the latter half of 2012 when there was a change of guard at the Finance Ministry. We are of the view that if the government led by a vibrant Chidambaram and his team of economic advisors are able to actually walk the talk then the Indian market will be on a winning streak like last year.

Asset AllocatioN IN THE PORTFOLIOS

Table 1: Current Allocations in the Portfolios

Current Portfolio
  Conservative Moderately Conservative Balanced Moderately Aggressive Aggressive Moderately Aggressive (Global) Aggressive (Global)
Bonds 90% 70% 50% 30% 10% 30% 10%
Equity 10% 30% 50% 70% 90% 45% 60%
Global Equity 0% 0% 0% 0% 0% 25% 30%

Table 2: Portfolio Fund Allocation Changes

    Target Asset Allocation with effect from 1 Feb 2013
Asset Allocation Fund Name Conservative Moderately Conservative Balanced Moderately Aggressive Aggressive Moderately Aggressive(Global) Aggressive(Global)
DEBT
Ultra Short Term Funds Templeton India Ultra-Short Bond Fund 20 15 10 5 - 5 -
Short Term Funds PineBridge India Short Term Fund 40 25 20 5 5 5 5
Income Funds Canara Robeco Income Fund 15 15 10 - - - -
Templeton India Income Builder Account - - - 20 5 20 5
Dynamic Bond Funds Birla Sun Life Dynamic Bond Fund 15 15 10 - - - -
EQUITY
Large Cap funds
ICICI Prudential Focused Bluechip Equity Fund
5 10 15 - - - -
DSP BlackRock Top 100 Equity Fund - - - 10 15 10 10
Multicap Funds Mirae Asset India Opportunities Fund - - - 10 15 5 10
UTI Opportunities Fund - 10 15 - - - -
Midcap & Small cap Funds SBI Magnum Sector Funds Umbrella-Emerging Businesses Fund - - - 15 20 10 15
Dividend Yield Funds Birla Sun Life Dividend Yield Plus 5 10 10 - - - -
Contra / Value ICICI Prudentail Discovery Fund - - 10 15 20 10 15
Infrastructure Funds PineBridge Infrastructure & Economic Reform Fund - - - 10 10 5 5
Banking & Financial Funds Reliance Banking Fund - - - 10 10 5 5
Global Funds Franklin Asian Equity Fund - - - - - 10 15
JPMorgan JF Greater China Equity Off-shore Fund - - - - - 15 15

changes in category allocation

  • Fixed Income

For our fixed income investors, we have been advising that 2013 is the year to look out for duration funds. Similar to the views floating in the market, we also feel that the central bank will follow a monetary easing path this year but the pace might be slow as there are still some threats to inflation which has been the biggest cause of concern for the Reserve Bank of India (RBI). Hence investors with a time horizon of 12 months to 18 months can consider some of our dynamic bond funds /income funds. We are also of the opinion that there is still some steam left on the shorter end of the curve and investors who want to take an exposure into fixed income funds for a period of 3-6 months should consider our short-term funds.

One of the biggest changes that we have made this year in all our portfolios, with the exception of the aggressive portfolio, is to give some allocation to ultra short-term funds. This step has been taken as a sort of liquidity measure and in addition to this we also feel that a cushion like this will enable an investor to use this surplus to increase his equity exposure whenever there are opportunities in the market. In this context, we would like to inform our investors that Templeton India Ultra-Short Bond Fund has replaced BNP Paribas Money Plus Fund in our portfolios. We have also made a change in our short-term fund with PineBridge India Short Term Fund replacing Templeton India Short-Term Income Plan in all our 7 portfolios. A relatively small fund which saw its corpus grow from INR 83 crore in February 2012 to INR 649 crore in December 2012, the fund has been able to put good numbers on the table despite the conservative stance that it adopts.

As far as duration funds go, we have not taken any exposure to gilt funds since we believe that these funds are a tactical allocation which requires active management. In this scenario, investors who want to take an exposure into gilt funds should do so after having consulted their financial advisors.

On the other hand, in the case of income funds, our top pick of last year - ICICI Prudential Income Plan, has been replaced with Canara Robeco Income Fund in our conservative, moderately conservative and balanced portfolios while Templeton India Income Builder Account finds a place in our moderately aggressive and aggressive portfolios.

Finally, Birla Dynamic Bond Fund, which was a part of all our portfolios last year, currently gets an allocation only in the conservative, moderately conservative and balanced portfolios.

  • Equity

Large-cap funds
We have considered ICICI Prudential Focused Bluechip Equity Fund as the best bet for our conservative, moderately conservative and balanced investors. We are of the view that a fund with a concentrated portfolio should be able to maintain the consistency in performance for those investors who are risk averse. On the other hand, DSP BlackRock Top 100 Equity Fund has made an entry into our moderately aggressive and aggressive portfolios. The active management being followed in this fund is the reason behind this decision. On the other hand, UTI Dividend Yield Fund, which we have been recommending to our conservative, moderately conservative and balanced investors, has been replaced with Birla Sun Life Dividend Yield Plus. This is on account of the review that has happened in our recommended funds for 2013.

Multi-cap funds
We took a stand this year that UTI Opportunities Fund  is more suitable for investors falling in the moderately conservative and balanced categories as it has  more than 80% of its assets concentrated in large-cap stocks. On the other hand, Mirae Asset India Opportunities Fund has been included in moderately aggressive and aggressive portfolios. The tactical allocation of 10%-15% that the fund manager uses to generate the extra alpha makes it a good bet in these portfolios.

Mid-cap funds
Our investors would be surprised to see our top mid-cap funds like HDFC Mid-cap Opportunities and IDFC Sterling Equity Fund not finding a place in our portfolios this year. Although these funds continue to be in our recommended list, we thought of presenting a set of new funds in the mid-cap segment. In this case, SBI Magnum Sector Funds Umbrella - Emerging Businesses Fund, the best performing fund on our platform gets an allocation in our moderately aggressive and aggressive portfolios. This fund managed by R Srinivasan takes an aggressive stance in its mid-cap stocks while we feel that the increased allocations being made into the large caps will definitely help it to tide over any volatility that the fund might face in the coming months.
Another addition made this year is ICICI Prudential Discovery Fund, a value fund with a mid-cap tilt. We are of the view that if our investors have the patience to wait for 3 years till the stocks in the portfolio unlock their value then this is the best bet that we can consider in this space.

Sector funds
As for our sectoral allocation, we continue to be positive on the banking and infrastructure space. In the former, our preferred fund remains Reliance Banking Fund. In the case of the latter, PineBridge Infrastructure & Economic Reform Fund has replaced ICICI Infrastructure Fund. Since we already have a pure banking fund in our moderately aggressive and aggressive portfolios, it would be better to take an exposure into a fund whose entire portfolio allocation is into infrastructure stocks and this will, in turn, aid diversification that is required in our portfolios.

Global funds
Mirae Asset China Advantage Fund has been replaced by JP Morgan JF Greater China Equity Off-shore Fund on account of the changes that have been made in the recommended funds for this year.

Changes in Funds included in the Portfolios

Table 3: New fund additions and old fund deletions

Changes in scheme 
Category Old New
Ultra Short Term Fund BNP Paribas Money Plus Fund Templeton India Ultra-Short Bond Fund
Short Term Funds Templeton India Short-Term Income Plan  PineBridge India Short Term Fund
Income Funds ICICI Prudentail Income Plan Canara Robeco Income Fund
    Templeton India Income Builder Account
Gilt Funds ICICI Prudential Gilt Fund Investment Plan -
Large cap Funds Franklin India Bluechip Fund DSPBR Top 100 Equity Fund
Multi cap Funds L&T Equity Fund Mirae Asset India Opportunities Fund
Mid & Small cap Funds IDFC Sterling Equity Fund SBI Magnum Sector Funds Umbrella-Emerging Businesses Fund
  HDFC Mid-Cap Opportunities Fund -
Contra / Value Funds - ICICI Prudential Discovery Fund
Dividend Yield Funds UTI Dividend Yield Fund Birla Sun Life Dividend Yield Plus
Infrastructure Funds ICICI Prudential Infrastructure Fund PineBridge Infrastructure & Economic Reform Fund
Global Funds Mirae Asset China Advantage Fund JPMorgan JF Greater China Equity Off-shore Fund

Conclusion

Our portfolios were revamped on February 1, 2013 and our factsheets from next month will take into consideration these changes.

Please feel free to get back to us on feedback@fundsupermart.com if you require any clarifications in   our model portfolios.


iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's offer document/scheme additional information/scheme information document. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer in the website.

 



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