ICICI Pru Consumption Plans trim cash holdings, but still have a pile

BHARAT SERIES SCHEMES still have 18-39% cash against 5-10% industry average; experts say this indicates that they may not be fully comfortable with the valuations just yet.

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ICICI Prudential Mutual Fund's close-ended equity schemes, which invest in consumption stocks, held as much as 18-39 per cent of their portfolios in cash as on February 28, way higher than the industry’s average of 5-10%. Investment advisors said this suggests share valuations in this theme are still rich though the fund house said cash levels have come down in the last six months.

Five close-ended schemes part of ICICI Prudential's Bharat Consumption Fund series held cumulative assets of ₹1,719 crore and were launched between April and November 2018.

When a fund manager prefers to hold assets in cash, it’s an indication that she is not comfortable with valuations of the shares. “The fund manager believes safety is a priority for investors and is looking at fair value for a stock before allocating money,” says Rupesh Bhansali, head (distribution), GEPL Capital.


ICICI Prudential said the cash level of the Bharat Consumption schemes has come down from 30-55 per cent in September.

“The level of cash or hedge in our portfolio saw a steady decline from September 2018 to February 2019, a phase when several pockets in the market were available at attractive valuations,” says S Naren, CIO, ICICI Prudential Mutual Fund.

Naren points that the benefit of this move is visible through the return profit of the fund which has outperformed its benchmark Nifty India Consumption Total Returns Index (TRI) and provided effective downside protection. From its peak of 5,400 in August 2018, the Nifty Consumption Index is down 10.35 pe rcent to to 4,841. Several stocks in the consumptions space like Maruti, Hero MotoCorp, Godrej Consumer are down by 20-35 per cent from their yearly highs, as valuations were high and consumption failed to pick up as anticipated.

Distributors believe it is early to evaluate the performance of the schemes as most have yet to even complete a year. They point out that a high cash holding clearly indicates the fund manager is not comfortable with valuations and investors should avoid the consumption space. Most fund managers barring a few avoid taking holding higher levels of cash their schemes. Holding cash could be a double-edged sword, higher levels could hit NAVs or net asset value if the markets were to move up.

ICICI Prudential Bharat Consumption Fund series has a tenure of 1,100-1,300 days or about 3.5 years and most of them will come up for maturity between November-December 21 . Though these units are listed on the stock exchange, its difficult for investors to exit in the absence of liquidity.

Cash Levels In Portfolio
ICICI Pru Bharat Consumption Fund Cash holding (%)
Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19
Fund-1 52.7 34.59 28.75 30.7 1.93 24.68
Fund-2 55.84 51.99 35.18 34.93 36.78 39.56
Fund-3 50.78 32.75 29.37 32.98 43.56 27.59
Fund-4 29.07 30.57 26.43 19.24 17.92 18.46
Fund-5 NA NA 92.95 20.7 15.49 17.59
Source: Accord Fintech, compiled by ETIG Database

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