ICICI Pru to have only 20 stocks in new portfolio

Q: Tell us a bit about the focus of this fund?

A: This ICICI Prudential Focused Equity Fund will be a largecap oriented fund. So we will be investing among the top 200 companies sorted by marketcap and it will remain a focused fund i.e. it will only have about 20 stocks in the portfolio. So each stock we will be taking a large bet and this is a different kind of fund that we have introduced because we believe that investors at this moment should be looking at largecap much more seriously because largecap valuations have corrected a lot and therefore are available at attractive valuations and we believe that India growth story being what it is, they should gain good rewards if they were to invest in largecaps with a medium to long-term investment horizon.

Q: You will look at 20 stocks essentially within the Nifty or you could include some of the larger names outside the index too?

A: We could include larger names also because the investment universe for us will be the top 200 companies compared to the top 50 companies that are represented in Nifty.

Q: How different is this from anything that ICICI might currently have in its stable?

A: We don’t have any other fund which is a focused fund per se. We do have some largecap oriented funds but those are all funds with much more number of stocks in them. So this is a different product that we have brought out for investors with a different kind of mindset, for investors who believe in a focused style of investing. So we are trying to offer a product, which is suited to investor which will have some different kind of appetite for investments.  

Q: Any back-testing you have done with portfolios to check whether more focused and less fragmented portfolios. What kind of returns they generate compared to more diversified portfolios?

A: We have done all the back-testing. Even with a portfolio which had only ten good stocks and ten bad stocks, it outperformed the markets in almost all the investment period that we had. So we believe that with the edge that we have due to our research process, our good depth of the research team will be able to do much better than that.

Q: I believe the aim is to generate greater alpha by concentrating on specific stocks. So if you have to make that basket right now what would you pick in a basket of five-seven counters?

A: We cannot comment on individual stocks. But the sectors where we would be focusing upon more will be sectors which will be showing much higher growth over the next three-five years because we believe that there are several growth opportunities still in India despite whatever concerns we are seeing - both on global and local front and therefore, these companies would be related to the infrastructure story, these companies would be relating to the financial services story - these are the stories that we believe in and we believe that these stories will give us good rewards in the times to come.

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