During the three-year period through December 2009, the financials, materials and energy sectors on an average accounted for highest holdings in the fund's portfolio. The fund manager preferred banking shares owing to expectations of long-term economic growth and increased growth for banking companies. In banking, ICICI Bank (6.2%) and State Bank of India (4%) featured in top-10 holdings while the housing loan provider, HDFC accounted for 4.4% of the fund's corpus.
Within the materials sector, the fund had higher allocation to steel stocks prior to 2008. Global economic meltdown in 2008 led to decrease in steel holdings and the manager prefers them now more from an opportunity point of view. Within energy sector, the manager favoured public sector companies like Oil and Natural Gas Corp (ONGC) and Gas Authority of India Ltd (GAIL) owing to higher dividend yields and attractive valuations. The expansion in gas pipeline and growth in earnings also led to an increase in allocation to GAIL. The utilities sector accounted for 12% of the fund's corpus. Here, National Thermal Power Corp accounted for 4.5% of the fund's corpus mainly from a defensive point of view. The manager liked Tata
Power given its coal linkages and its Mundra project benefitting under the government proposed ultra mega power projects.
During the sharp equity selloff in 2008, the manager used cash to protect the fund's downside and had cash allocation as high as 32%. This was reduced gradually in second half of 2009, but dragged down the fund's performance during the first half of 2009 when stocks rallied.
Performance
Relative to its large cap equity category, the fund delivered superior risk-adjusted return. During the three-year period through December 2009, the fund registered the best risk-adjusted return and was ranked at first position with five stars rating from Morningstar. In terms of trailing return, the fund returned 20.75%, significant outperformance of 11 percentage points over its benchmark- BSE 100 index and 12.5 percentage points over its large-cap peers. The fund's performance over shorter time periods has been quite noteworthy too. Except the sharp underperformance in 2006, its
performance has been quite consistent across last three calendar years starting with 2007. In 2006, the fund lagged its peers owing to the rally in construction and capital goods stocks which the manager avoided owing to their lower dividend yields.
Risk
The fund depicts lower volatility, as compared to its peers, owing to its relative value bias. The fund featured in "Below Average" risk rating for threeyear period through December 2009.
Costs
The fund's expense ratio of 2.09% is lower than its category average of 2.15% which works in fund's favour.
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