ICICI Prudential Dynamic Plan – Invest (NAV Rs90.8)

Since October ’09, S&P Nifty has been hovering in the range of 4,900 – 5,180. Soaring food prices and fears over monetary contraction have been the catalyst for such anemic market. Furthermore, valuations no longer appear cheap when compared with other emerging markets. Though economic recovery is well underway, there is a lack of clear direction for the market. In such a milieu, we advise investors to play it safe. Hence, we recommend investing in ICICI Prudential Dynamic Plan (IPDP). The scheme is characterized with large-cap exposure, sector-diversification and steady returns.

Investment rationale

• IPDP has been one of the top performers across market cycles including the bull market, the bear market, and a fledging new rally. It has not only generated a decent alpha during the bull phase but has also contained its downside during the bear phase.
• It has been a robust performer in its category since inception, with a CAGR of 35% since launch, ten percentage points above S&P Nifty’s CAGR over the same period. Since March ’09, the fund NAV has more than doubled.
• IPDP maintained an extensive and well-diversified portfolio of defensive and aggressive sector companies and has maintained lowest expense ratio of 1.92% when compared with its peers.
• With a current cash holding of 16%, highest amongst its peers, the fund seeks to optimally use value picks during any corrections. It also has an exposure in derivative instruments, as a hedging tool, to absorb volatile shocks and also to maintain the portfolio’s liquidity.
• We recommend investment in IPDP as a defensive bet for investors based on its robust past performance, the fund manager’s track record, and good dividends.

Analysis

IPDP has proven to be a good defensive play and has weathered the market volatility well in the past. The fund’s proven track record along with the strong credentials of its investment team makes it a good bet for long-term equity investors and for relatively risk-averse, investors who seek to invest in a well-blended equity fund with a degree of downside protection. We recommend investing in IPDP in the diversified-fund category.