Mar 20, 2008

ICICI Prudential Emerging Star - Analysis

ICICI Prudential Emerging Star — Adding to textiles, finance

ICICI Prudential Emerging STAR is a three-year-old, mid-cap focussed fund, but with a diversified basket of sectors and stocks. Although on a three-year CAGR basis, the fund has outperformed its benchmark Nifty Junior, its performance over the last year has been indifferent.

Over this period, it has under-performed its benchmark considerably. With a portfolio of over 50 stocks the basket does appear diversified. Both the sector and stock preferences have been off the beaten track, vis-À-vis the choices of other diversified funds.

In the October 2007-January 2008 period, the fund's corpus grew 2.4 per cent to Rs 917 crore, while the NAV grew 0.95 per cent to Rs 34.57. This may indicate a net inflow into the fund during these three months. In the January stock market correction, as with other midcap funds, the fund saw an over 20 per cent NAV erosion.

Sector Moves: There appears to be a fair bit of stability in terms of top 10 sector holdings in the fund during this period. Entertainment and electronic media (11 per cent) continues to be the top sector holding for the fund, an unconventional choice compared to other diversifieds.

Even as many funds pare exposures to software services companies on the back of macro cues, this fund has maintained its level of exposure (8.3 per cent) to the sector but mostly to Tier-2 IT services companies.

Two strong domestic themes, ferrous metals and construction have seen increased exposures and figure among the top sector holdings. Exposure levels have also been increased in textiles and finance segments; while they have been pared in cement.

Stock Moves: Ruchi Soya Industries and Subhash Projects, that gained over 24 per cent during October 2007-January 2008, found their way into the portfolio. Gujarat NRE Coke, that gained 20 per cent during this period has been included. Shriram Transport, that gained over 45 per cent, is a fresh add. There are several stocks which were beaten down by between 10-42 per cent, such as IVRCL Infrastructures, Tech Mahindra and Titan Industries, that their way into the fund.

Deccan Chronicle (6.7 per cent) and Welspun Gujarat (5.2 per cent) are the top holdings and have been so over the three months. Other important stocks include Provogue, Prime Focus, Aditya Birla Nuvo, Patel Engineering and India Infoline.

Interestingly, 3i Infotech, Subex Azure, Geodesic Information still remain with the fund.