Over time, Mrinal Singh has emerged as a skilled portfolio manager. Singh, who started his stint with ICICI Prudential AMC in June 2008 as an equity analyst, took over a technology sector fund in August 2009. In February 2011, when he took over here, it was his first stint running a diversified fund. Since then, we have had the opportunity to evaluate him and his investment approach across market cycles, enabling us to build confidence in him. While Singh specialises in value investing, he is also an expert in the small/mid-cap segment, an area where he gained extensive experience as an analyst.
Singh runs ICICI Prudential Value Discovery Fund with a valuation-conscious approach, investing in stocks that he believes are trading at a significant discount to their fair value. Until mid-2014, Singh invested predominantly in the small/mid-cap segment. However, since then, this aspect of the strategy has undergone a change; the allocation to large caps has increased significantly (from roughly 25% earlier to nearly 70% as of August 2016). During our interaction with the fund house, the investment team maintained that the fund has always been positioned as a flexicap fund; hence, the increased allocation to large caps is consistent with the positioning. Nonetheless, the modified approach is a departure from the manner in which the fund was run earlier. Also, recently the fund house changed the fund’s benchmark index from CNX Midcap to S&P BSE 500.
In our opinion, this change can be attributed to two factors: stretched valuations in the small/mid-cap segment and a surge in assets to INR 143.6 billion as of August 2016 from INR 35.3 billion as of April 2014.
Despite the change, what continues to work for the fund is the presence of Singh and his robust investment approach. We continue to draw confidence from his stock-picking skills and ability to execute the strategy with skill. We believe the fund has the wherewithal to outperform its benchmark index over the long term. Hence, we upgrade the fund from a Morningstar Analyst Rating to Silver from Bronze.
Unless stated otherwise, this report was prepared by the person(s) noted in their capacity as Manager Research Analysts (i.e., fund analysts) employed by Morningstar, Inc., or one of its affiliates. It has not been made available to the issuer prior to publication.
Analyst Ratings are subjective in nature and should not be used as the sole basis for investment decisions. Analyst Ratings are based on Manager Research Analysts’ expectations about future events and therefore involve unknown risks and uncertainties that may cause such expectations not to occur or to differ significantly from what was expected. Analyst Ratings are not guarantees nor should they be viewed as an assessment of a fund’s or the fund’s underlying securities’ creditworthiness.
No material interests are held by Morningstar or the Manager Research Analyst in the financial products that are the subject of the research reports or the product issuer. Regarding Morningstar’s conflicts of interest: 1) Manager Research Analysts’ compensation is derived from Morningstar’s overall earnings and consists of salary, bonus and in some cases restricted stock; however, Manager Research Analysts are neither allowed to participate directly or try to influence Morningstar’s investment management group’s business arrangements nor allow employees from the investment management group to participate or influence the analysis or opinion prepared by them. Further information on Morningstar’s Code of Ethics policies is available from http://corporate.morningstar.com/us/asp/subject.aspx?xmlfile=540.xml
Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission.
For Recipients in India: Research on securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (“Investment Research”) is prepared by Morningstar Investment Adviser India Private Limited, which is registered with the Securities and Exchange Board of India. Your access to the Investment Research does not establish an advisory relationship with Morningstar Investment Adviser India. You should seek the advice of a financial professional before making an investment decision to ensure, among other things, that the security is suitable based on your particular needs and circumstances.