SBI Bluechip Fund: Steady Long-term Bet?

Notably, there has been a growing debate about the ability of actively managed large-cap funds to reward investors with superior returns over the benchmark. However, if you carefully select funds in the large-cap space, you can benefit from its steady growth potential.

SBI Bluechip Fund (SBCF) is one of the most popular funds in the large-cap funds category that has shown significant improvement in performance in the current bull phase to figure among the category outperformers.

Data as on May 04, 2021
(Source: ACE MF)

SBCF has managed to keep pace and outperform the benchmark in terms of performance over the last 1-year to 2-year period. Whereas, over the 3-year and 5-year period, the fund has trailed the benchmark though nearly in line with the category average. Notably, the fund's performance had slipped in the past couple of years. Most other prominent large-cap peers too have been found struggling to keep up their performance. Over the longer time period of 7 years SBCF has maintained a significant lead over the benchmark and generated an alpha of about 2.5 percentage points.

SBCF has encountered slightly higher volatility when compared to its benchmark and the category average whereas it fares lower In terms of risk-adjusted returns when compared to the benchmark and prominent large cap peers. However, with an experienced fund manager at the helm, SBCF has the potential to show market-beating performance and create wealth for its investors.

Investment strategy of SBI Bluechip Fund

Categorised under large-cap funds, SBCF is mandated to invest a minimum 80% of its assets in large-cap stocks. While the fund's portfolio remains biased towards large-caps, it does make opportunistic allocations to mid-caps, but well within the mandated limit. Erstwhile, the fund maintained its own definition of large-caps, but now has to stick to the list provided by AMFI. SEBI has stipulated that the first 100 stocks by market capitalisation will be considered as large-caps.

The fund manager aims to invest in such large-sized companies with an established business presence, good reputation, solid brand equity and which are possibly market leaders in their industries with less uncertainty in top-line and bottom-line growth. The investment team also aims to keep an eye on consistency in management performance, change in leadership and key management decisions that can affect the outlook of the business.

SBCF usually holds about 50-60 stocks in its portfolio and follows a buy and hold investment strategy, which reflects the strong long-term conviction the fund management has while picking stocks for the portfolio. Notably, the turnover ratio of the fund has dropped significantly to 15% from around 70% in the last one year, indicating low churn in the portfolio.

As on March 31, 2021, SBCF held a well-diversified portfolio of as many as 52 stocks. The top-10 stocks accounted for around 47.4% of the portfolio. HDFC Bank topped the list with an allocation of around 9.6%, followed by some other popular large-cap names like ICICI Bank, Infosys, HCL Technologies, L&T, ITC, HDFC Ltd., Shree Cement, Divi's Laboratories, and SBI. Notably, the top portfolio holdings contain a good mix of stocks belonging to different sectors.

Stocks like HDFC Bank, ICICI Bank, HCL Technologies, Cholamandalam Investment & Finance, Divi's Laboratories, Reliance Industries, Infosys, L&T, Motherson Sumi Systems, SBI, among others have turned out to be major contributors to its gains in the last one year.

About 35.7% of SBCF's portfolio is exposed to Banking and Finance stocks, of which banks account for around 22.4% while other finance stocks account for 13.2%. Infotech, Engineering, Auto, Pharma, and Petroleum Products are the other top holdings with an allocation in the range of around 6%-11% each. The top 5 sectors in the fund's portfolio together account for around 62.8% of its assets.

Suitability

SBCF holds a decent performance track record over longer time periods of over 5 to 7 years. The fund has distinctly outperformed the benchmark, as well as most of its large-cap peers on many occasions which still gives investors the confidence of its future potential. SBCF has sound risk management techniques as well which has helped it to curb the downside risk and to participate during bull phases.

SBCF's strategic minor allocation to mid-caps helps it generate significant growth during mid-cap rallies. Moreover, since the fund is completely benchmark agnostic, and its allocation to certain sectors may significantly deviate from the benchmark.

This makes SBCF suitable for long-term investors looking for stability as well as high growth from a large-cap biased fund.

Warm Regards,
Divya Grover
Research Analyst

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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.

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