The equity funds from the DSP BlackRock stable have had a rough 2013. Our senior research analyst recently revisited the ratings assigned to three of its funds and came away convinced of the stability of these offerings.
In the small/mid-cap category, DSP BlackRock Small and Midcap retains its Silver rating. In the large-cap space, DSP BlackRock Top 100 Equity and DSP BlackRock Equity have both reiterated their Gold rating.
In a quick interaction, Apoorva Shah, fund manager of all the above three equity funds, quickly shares his views.
- How would you explain the underperformance of 2013?
Our portfolios were positioned for recovery in January 2013 when the emphasis was on interest rates cuts. This helped us in the last quarter of 2012 but, unfortunately, circumstances changed and the fiscal deficit was tightened and we had the U.S. tapering scare. So basically, we were premature in our assumption of recovery.
While we were wrongly positioned for recovery, due to tightness in liquidity, we were unable to change the portfolio in time. In fact, it took us around 4-5 months to reduce our mid-cap exposure by 10%.
So in a nutshell, two aspects worked against us in 2013: The wrong positioning of our portfolio and the illiquidity of the market compared to the size of our portfolio.
- Your mentioned reducing your mid-cap exposure. In DSP BlackRock Equity, you tend to be equally balanced between large and small fare.
You are right. Normally, we have a 50:50 weightage to large and mid caps in DSP BlackRock Equity. But we have reduced our mid- and small-cap exposure. Right now, we are 66% into large caps with the balance in mid and small caps. We are still overweight the benchmark, but we have significantly reduced the extent of overweight. After we bled in the first few months of the year, we arrested the pace of decline.
- When you say "wrong positioning", can you specify some tactical calls that you took?
We took some tactical calls around the taper fears and the subsequent non-taper relief rally that happened in a significant measure during the year.
We raised the IT sector weightage around taper fears significantly. After being aggressive in IT stocks, we booked profits in them.
The banking sector weightage was raised around the non-taper relief rally. This sector weight had been significantly reduced during the taper fear crash.
Going ahead, we believe that we are near to recovery and our portfolios are positioned accordingly.
To understand how the analyst rating is arrived at, click here.
For an explanation on why funds with a sub-par performance still get a high analyst rating, click here.
To read the analysis, click on the funds:
