ICICI Prudential Focused Equity Fund: Demonstrating Remarkable Growth through a Focused Approach

ICICI Pru Focused Equity Fund is a Focused Fund that aims to grow investors' wealth through a concentrated portfolio of a maximum of 30 stocks spanning across market caps. Initially launched as a Large Cap Fund in May 2009, the fund was earlier known as ICICI Pru Select Large Cap Fund and primarily held a portfolio of large-cap stocks. However, after being re-categorised as a Focused Fund in 2018, it gained the flexibility to invest across large-cap, mid-cap, and small-cap stocks, although its portfolio remains predominantly focused on large caps. The fund aims to identify fundamentally sound companies with robust balance sheets, high-quality sustainable cash flows, and low leverage.

Backed by a fund house known for stable investment processes, and an experienced fund manager who favours value and contrarian investment styles, ICICI Pru Focused Equity Fund generally avoids momentum-driven stocks and sectors. This strategy enables the fund to mitigate the downside risk during challenging market conditions while enabling participation in market recoveries and bull phases. Notably, ICICI Pru Focused Equity Fund witnessed weak growth between 2017 and 2019 due to its low exposure to certain stocks that drove the benchmark index rally. However, it demonstrated significant improvement in performance from the year 2020 onwards to find a place among the top performers in the Focused Fund category.

Over the past five years, ICICI Pru Focused Equity Fund has grown at a compounded annualised rate of 25.7%, surpassing the benchmark returns of 20.1% CAGR. An investment of Rs 10,000 in ICICI Pru Focused Equity Fund five years back would have now tripled to Rs 31,429 as against Rs 25,025 in the BSE 500 - TRI index.

ICICI Pru Focused Equity Fund has shown a remarkable performance turnaround in recent years, positioning itself as one of the top performers in the Focused Fund category. Although the fund has encountered intermittent periods of underperformance, its long-term performance is reasonable. Notably, it has recorded superior growth in the last few years and has managed to outpace the benchmark by a noticeable margin. In the last 1-year to 3-year periods, ICICI Pru Focused Equity Fund has outpaced the benchmark and the category average by around 5-8.5 percentage points. Moreover, the fund has also outscored the benchmark and many of its peers over the longer time period of 5 years and 7 years.

In terms of volatility (standard deviation), ICICI Pru Focused Equity Fund exhibits one of the lowest levels within the Focused fund category, considerably lower than the benchmark. Additionally, its Sharpe ratio (0.32), which measures risk-adjusted returns, currently ranks among the best in the category and significantly surpasses the benchmark. With its potential to deliver solid returns, the fund has displayed its ability to offer investors the opportunity to benefit from superior risk-adjusted returns.

What is the investment strategy of ICICI Pru Focused Equity Fund?

Categorised under Focused Funds, ICICI Pru Focused Equity Fund is mandated to invest in a concentrated portfolio of up to 30 equity and equity-related securities. The fund has the flexibility to follow a multi-cap approach to invest across market caps but it usually holds a large-cap bias and aims to identify stocks that have the potential to outperform over the medium to long term. It follows a bottom-up approach to select fundamentally sound stocks based on parameters such as Discounted cash flow, Return on investment, Return on invested capital relative to the weighted average cost of capital, Price/Book Value, Earnings yield, etc.

ICICI Pru Focused Equity Fund focuses on investing in companies that have robust business financials, quality management, above-average profitability, and sustained competitive advantages. It also discerns value to assess the growth potential of the stock. The fund is sector-agnostic and maintains an overweight stance on select high-conviction themes/sectors that are expected to outperform in the ongoing economic cycle. While ICICI Pru Focused Equity Fund holds several of its stocks with a long-term view, it occasionally churns a portion of its portfolio to benefit from market opportunities. Accordingly, the fund has exhibited a moderately high turnover ratio between 85% and 110% in the last one year.

Being a Focused Fund, ICICI Pru Focused Equity Fund maintains a concentrated portfolio comprising a maximum of 30 stocks at any given time. As of September 30, 2024, the fund held 29 stocks in its portfolio diversified across sectors. The fund held its top exposure in large-cap names like ICICI Bank, Sun Pharma, Axis Bank, and HDFC Bank. Meanwhile, Info Edge (India), L&T, Avenue Supermarts, Infosys, NTPC, and Bharti Airtel are among the other top stocks in the fund's portfolio. The top 10 holdings in the fund's portfolio collectively account for about 48.2% of the total assets.

Over the last two years, ICICI Pru Focused Equity Fund has benefitted the most from its exposure to Bharti Airtel, Sun Pharma, L&T, TVS Motor Company, ICICI Bank, and The Phoenix Mills that have helped it generate significant gains for investors. The fund also benefitted from Dabur India, Cummins India, Siemens, Zydus Lifesciences, NTPC, Info Edge (India), Syngene International, Avenue Supermarts, Page Industries, Hitachi Energy India, Bosch, among many others, that have grown significantly in value since the time the fund added them in the portfolio.

ICICI Pru Focused Equity Fund's portfolio is skewed towards Financials, with Bank stocks carrying around 20% weightage in the portfolio, with another 10.9% in Finance stocks. Pharma and Engineering are the other core sectors in the portfolio carrying a combined allocation of 20.5%, while Infotech, Auto, Cement, and Construction, are among the other prominent sectors in the fund's portfolio. Around 82.7% of its portfolio is spread across the top 10 sectors. Although the fund's portfolio is biased towards cyclicals, it has significant exposure to defensive and sensitive sectors as well.

Is ICICI Pru Focused Equity Fund suitable for my investment goals and risk tolerance?

ICICI Pru Focused Equity Fund has demonstrated remarkable improvement in its performance over the past few years and has emerged as one of the top performers in the focused fund category. Meanwhile, its performance has been reasonable compared to the benchmark. In the past too, the fund surpassed the benchmark and many of its peers by a wide margin during certain periods, delivering higher returns for investors in the scheme. More importantly, it has achieved this feat while maintaining a controlled level of volatility and has rewarded investors with superior risk-adjusted returns.

ICICI Pru Focused Equity Fund adopts a sector-agnostic approach and maintains diversification across sectors at all times. With a predominant focus on large-cap stocks, the fund has the potential to generate stable returns without exposing investors to excessive risk. However, its performance may be in sharp contrast to its Focused Fund peers, which often have significant exposure to stocks in the mid-cap and small-cap segments.

ICICI Pru Focused Equity Fund is suitable for investors seeking a large-cap-oriented Focused Fund with an investment horizon of at least 5 years.

Watch this video to know about the top-performing Focused Funds of 2024:

Note:  This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, Membership of BASL and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.

The securities quoted are for illustration only and are not recommendatory.

We are on Telegram! Join thousands of like-minded investors and our editors right now.

DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.
Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

Terms and condition on which its offer research report

For the terms and condition for research report click here.

Details of associates

• Group Companies including:

  1. Money Simplified Services Private Limited;

  2. PersonalFN Insurance Services India Private Limited;

  3. Equitymaster Agora Research Private Limited;

  4. Common Sense Living Private Limited;

  5. Quantum Advisors Private Limited;

  6. Quantum Asset Management Company Private Limited;

  7. HelpYourNGO.com India Private Limited;

  8. HelpYourNGO Foundation;

  9. Natural Streets for Performing Arts Foundation;

  10. Primary Real Estate Advisors Private Limited;

  11. HYNGO India Private Limited;

• Directors of the Company - Suresh Lulla; I V Subramaniam, Murali Ananthan Krishnan and Rafiq Dossani

1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

1. The Research Analyst has not served as an officer, director or employee of the subject Company.

2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Click here to read PersonalFN's Mutual Fund Rating Methodology

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021

Email:info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013 & BASL Membership Id: 1488

Investment in securities market are subject to market risks, read all scheme related documents carefully.