DSPML Opportunities Fund: Hold

K. Venkatasubramanian

Investors can continue to hold the units of DSPML Opportunities Fund, considering its long term track record in delivering steady returns. The fund is one of the few "Opportunities" funds with a five-year track record. The fund invests predominantly in large cap stocks with a well diversified sector-exposure, which may stand it in good stead in turbulent markets.

Suitability: Though "opportunities" funds are usually well suited to aggressive investors because they tend to take concentrated sector exposures, DSP ML Opportunities doesn't presently fit into this description. The fund's current portfolio is diversified across a large number of sectors and stocks which suggests that it may be able to deliver returns that are similar to those offered by a diversified equity fund.

Existing investors who want continued exposure to large-cap stocks and returns matching its benchmark – the Nifty in terms of returns can retain the units of the fund.

Performance and strategy: DSPML Opportunities' current portfolio features as many as 88 stocks across 29 sectors, making it one of the most diversified funds within the equity category. The fund has tended to take limited exposures to individual stocks.

Except Reliance Industries, all stocks including top 10 holdings take up exposures of less than four percent. This means that the portfolio weight in relation to its benchmark would be much lower in many stocks.

The fund's five year returns vis-À-vis Nifty have been very good (52 percent versus 40.7 percent). But its three year and last one year returns have been the more or less the same as the Nifty.

The fund is a large-cap (>Rs 7,500 crore) oriented fund with over 75 percent invested in this segment. This means that blips or negative earnings surprises, that are less likely in the case of large-caps, may make it better placed compared to a fund that has sizeable small/midcap exposures.

In terms of sector exposures, also concentration is lowered even in hot themes such as capital goods and banks. In the past year, exposures to software and telecom services was very high — the two sectors that underperformed markets. This may explain in part the underperformance of the fund vis-À-vis the Nifty.