The fund needs more seasoning, in our opinion.
In our 2012 review, we upgraded the fund’s rating from Negative to Neutral noting the changes in the investment process and investment team, both of which have traditionally been areas of concern.
On the process front, up until 2011 manager Jayesh Shroff freely took underweight/overweight positions versus the benchmark index S&P BSE 200 as per his convictions. However, the execution often left a lot to be desired. Also, Shroff tended to overweight sectors wherein he had expertise, thereby risking missing out on opportunities in other areas.
However, since 2011, Shroff has been plying a benchmark-aligned growth-oriented approach in place of the erstwhile benchmark-agnostic process. As per the new strategy, the portfolio’s sector weights are loosely aligned with those of the S&P BSE 200 index (within the range of +/- 7 percentage points). This in our view was a positive change that resulted in the process becoming more disciplined.
The investment team, which has seen significant turnover in the past, is gradually gaining traction. In particular, we draw confidence from the presence of R. Srinivasan, who doubles as portfolio manager and head-equities. We think his contribution at the helm of the equity function will aid the investment team in no small measure.
Nonetheless, there are some areas that we believe merit more watching. To begin with, these are yet early days for the new approach and it is yet to be thoroughly tested. For a better part of the period when the modified approach has been in place, market conditions have rewarded benchmark-alignment in portfolio construction. We would prefer to assess the strategy over a full market cycle. On the parent front, SBI's track record has been mixed; the firm issued some new products when it did not appear compellingly necessary to do so. Hence for now, we reiterate our Neutral rating.
Morningstar Analyst Rating™
With its bias for large-cap stocks, the fund can feature as a core holding in an investor’s portfolio.
Jayesh Shroff is an experienced portfolio manager. He has been at the fund’s helm since Mar 2006.
In our opinion, the fund company ranks as a subpar one in the Indian mutual fund industry.
Shroff focusses on growth stocks. He is mindful of the index while constructing the portfolio.
Under Shroff, the fund has been a strong performer on the return and risk-adjusted return fronts.
The fund’s expense ratio is lower than the median of the India Large-Cap category.