Quantum Information Services Private Limited Independent Mutual Fund Research April 25, 2009

This is a sample FundSelect - the weekly Mutual Fund advisory service from Personalfn. Please click here to subscribe to this service

Category View Risk High Return High Snapshot Fund Manager Deven Sangoi Current NAV Rs 76.83 Min./Add. Inv. Rs 5,000/1,000 Expense Ratio 2.36% (Jan. 09) Entry Load* 2.25% (Max.) Exit Load 1.00% (Max.) Net Assets Rs 2,349.7 m *Entry load on investments not routed through any distributor/broker is Nil Relative Performance (Base=100) NAV Performance NAV Index* 1-Yr -25.7% -32.5% 3-Yr -1.7% -1.9% 5-Yr 15.4% 11.8% Returns over 1 year are compounded annual averages (CAGR) S&P CNX Nifty Risk measures Std. Deviation 7.60% Sharpe Ratio 0.01%

ICICI Prudential Growth Plan The fund’s performance across parameters is reasonable without being exceptional. Is this fund for you? Large cap funds invest predominantly in the stocks of large cap companies. These companies are often well-researched and have a well-established track record. Hence, they tend to provide stable and predictable returns over longer time frames. Well managed large cap funds tend to imbibe similar traits and are capable of adding a degree of stability to the portfolio. ICICI Prudential Growth Plan (IPGP) is a large cap fund from ICICI Prudential Mutual Fund. The fund’s performance across parameters is reasonable without being exceptional. There are funds like DSP BR Top 100, which offers similar investment proposition, and has posted superior returns on most counts. In the light of the same, we recommend that investors should invest in DSP BR Top 100 ahead of IPGP. Fund Outlook Being a large cap fund, IPGP’s fortunes will be closely linked to that of the large cap segment. Over the long-term, the fund can be expected to draw from the key traits of large cap companies i.e. stability in performance and relatively lower volatility. In times when the mid cap segment hits a purple patch, the fund will lag peers with a fluid investment style, notwithstanding the fact that it can hold a smaller portion of its portfolio in mid caps. Also, the fund’s propensity for taking concentrated stock bets will make it an apt candidate for above-average volatility going forward. Fund Profile Launched in July 1998, IPGP has been positioned as a large cap fund. It is one out of the two large cap funds from ICICI Prudential Mutual Fund (average assets under management Rs 514.3 bn as on March 31, 2009), the other being ICICI Prudential Power. The differentiating factor between the two is that IPGP is positioned to invest a smaller portion of assets in mid cap vis-ŕ-vis ICICI Prudential Power. Having said that, by and large, IPGP stays invested in large cap stocks. Over 3-Yr the fund has posted a loss of 1.7% (in CAGR terms). It has clocked a return of 15.4% CAGR over 5-Yr and 20.8% CAGR since inception. Fund Manager Mr. Deven Sangoi, Head–Equity, holds a degree in Engineering and is an MBA. Before joining ICICI Prudential Asset Management Company (AMC) in September 2005, he was associated with Alchemy Share and Stock Brokers Private Ltd and Birla Sun Life AMC Ltd. Mr. Sangoi has been managing IPGP since October 2005.

Peer Comparison

NAV (Rs) Assets (Rs m) Top 10 Stocks (%) 1-Yr (%) 3-Yr (%) 5-Yr (%) Std. Dev. (%) Sharpe Ratio DSP BR Top 100 Equity (G) (R) 54.16 9,940.0 59.6 -24.0 4.1 18.9 7.20 0.06 Kotak 30 (D) 19.95 6,112.1 43.3 -32.7 -1.3 17.1 7.80 0.02 ICICI Pru.Growth Plan (G) 76.83 2,349.7 69.7 -25.7 -1.7 15.4 7.60 0.01 Magnum Equity (D) 18.85 2,007.8 50.3 -34.9 -2.3 14.8 8.60 0.00 Reliance Vision (G) 141.03 22,808.6 45.8 -31.3 -3.2 16.7 8.00 0.01 S&P CNX Nifty -32.5 -1.9 11.8   (NAV data as on April 02, 2009. Returns over 1-Yr are compounded annualised. Standard Deviation and Sharpe Ratio are calculated over 3-Yr period. (R) recommended) Over 3-Yr, the IPGP has posted a loss of 1.7% (in CAGR terms); it stands third in the peer group. DSP BR Top 100 (4.1% CAGR) occupies the top slot, followed by Kotak 30 (-1.3% CAGR) at second. Similar picture emerges over the 5-Yr period as well. IPGP (15.4% CAGR) comes in at third position while DSP BR Top 100 (18.9% CAGR) retains its top slot. IPGP has outperformed its benchmark index i.e. S&P CNX Nifty, over 1-Yr, 3-Yr 5-Yr time frames. Volatility Standard Deviation is a measure of the risk that the fund has exposed its investors to. With a Standard Deviation of 7.60%, IPGP is second only to DSP BR Top 100 (7.20%), the top performer in the peer group. Magnum Equity delivers (8.60%) the worst showing on this front. Risk-adjusted return Sharpe Ratio is a measure of returns delivered by the fund per unit of risk borne. IPGP’s (Sharpe Ratio 0.01) showing on this parameter fails to inspire. Once again, DSP BR Top 100 (0.06) delivers the best performance among peers, while Magnum Equity (with Sharpe Ratio of 0.00) fares the worst.

Equity Portfolio

Oct 2008 Nov 2008 Dec 2008 Jan 2009 Feb 2009 Nifty - Futures 22.6% 24.1% 21.7% 18.7% 25.3% Reliance Industries Ltd. 9.5% 8.0% 8.6% 9.4% 9.2% Bharti Airtel Ltd. 6.6% 7.8% 8.0% 7.2% 7.4% ONGC Ltd. 6.2% 6.6% 5.8% 5.8% 5.2% ITC Ltd. 3.4% 3.9% 3.7% 4.4% 5.0% NTPC Ltd. 3.3% 3.9% 4.2% 2.2% 4.8% BHEL 3.5% 3.8% 3.6% 3.6% 3.9% State Bank of India 2.9% 3.8% 4.3% 4.3% 3.4% Infosys Technologies Ltd. 4.5% 4.2% 2.8% 3.3% 3.2% GAIL 1.3% 1.3% 1.3% 1.2% 2.4%

Portfolio Strategy

IPGP aims to capitalise on the investment opportunities arising in the large cap segment. To achieve that, the fund does not restrict itself to a particular sector. Simply put, its investment universe comprises of large cap stocks from across sectors. Though, it has the flexibility to invest a smaller portion in mid cap stocks, for quite sometime now, it is entirely invested in large caps. The fund generally invests between 90%-95% of assets in equity and related instruments, and the balance in debt and money market instruments. The fund adopts a growth-oriented investment style. For stock picking, it pursues the bottom-up approach, i.e. it aims for a stock-specific investment strategy. The fund has a penchant for holding a concentrated stock portfolio. In the recent times, it is mainly due to its heavy exposure to the derivatives (Futures and Options) segment. Though in the past the fund has taken exposures in derivatives, albeit in smaller proportions; since September 2008 it has increased the same. As on February 27, 2009, the fund held 24 stocks in its portfolio accounting for 91.0% of the assets, and the balance (9.0%) was held in debt instruments. The top 10 stocks in its portfolio accounted for 69.7% of the assets, the highest in the peer group. Among peers, Kotak 30 (43.3%) held the most diversified stock portfolio, followed by Reliance Vision (45.8%). At Personalfn, we maintain that a diversified equity fund should hold no more than 40% of assets in the top 10 stocks, since a top-heavy portfolio can make the fund a candidate for above-average volatility during a downturn in equity markets.

Sectoral Allocation

The fund tends to hold a well-diversified sectoral portfolio. Over the last 1-Yr, Petroleum has been the fund's top picks. As on February 27, 2009, its top five sectors accounted for 41.0% of assets and stood second in the peer group. Reliance Vision (36.6%) fared the best among peers; whereas, Magnum Equity (44.0%) was at the other end of the diversification spectrum. For the purpose of computing sectoral holdings, similar-natured sectors have been clubbed together. For example, Oil and Gas have been clubbed under ‘Energy’.

Objective Vs Actual

IPGP’s investment objective mentions “To seek to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related securities.” The fund has posted a growth of 15.4% CAGR over 5-Yr time frame and 20.8% CAGR since inception in July 1998. To that end, it can be stated that the fund has achieved its investment objective.