Morningstar recently initiated analyst-research coverage for four funds: ICICI Prudential Discovery, HDFC Growth, ICICI Prudential Focused Bluechip Equity Retail and ICICI Prudential Infrastructure.
The recently-introduced Morningstar Analyst Rating is our opinion about a fund’s ability to outperform its benchmark or peers over the long term. Our analysts arrive at a rating (scale: Gold, Silver, Bronze, Neutral and Negative) after evaluating five key pillars that we think are critical to a fund’s success: People, Process, Parent, Performance and Price. You can read more about our analyst ratings methodology here.
Morningstar also issues its renowned star ratings, which are a measure of the fund’s historical risk-adjusted performance compared to funds in the same category. The backward-looking, quantitative star rating ranks a fund on the scale of one to five stars (with five being the best).
Here are some highlights of the analyst reports. To read the complete analysis, click on the fund’s name below.
Fund:ICICI Prudential Discovery
Overall Star Rating: 
Morningstar Analyst Rating: 
The fund has an impressive track record, beating both its benchmark and the category average over one-, three- and five-year time periods. It carries an overall four-star rating, which reflects its superior historical risk-adjusted performance compared to funds in the same category.
But the fund carries a Morningstar Analyst Rating of ‘Neutral’. The reason: the fund achieved most of its inspiring performance under previous manager Sankaran Naren, who quit portfolio-management duties earlier this year.
Current manager Mrinal Singh who has been with the fund company since June 2009 was earlier in charge of a technology fund earlier and this his fist stint at running a diversified equity fund.
“Singh maintains that he co-managed the fund alongside Naren for a six-month period as a part of the transition process before taking over the fund,” says the analyst report, “and he says that he will ply the same strategy as Naren.”
“However, the brevity of his track record on diversified equity funds restricts our conviction,” the report adds. Plus it remains to be seen how successful Singh in executing the strategy.
Fund: HDFC Growth
Overall Star Rating: 
Morningstar Analyst Rating: 
Manager Srinivas Rao Ravuri had a similar challenge as ICICI Pru Discovery’s Mrinal Singh featured above when he took over this fund in April 2006. He had little prior experience in portfolio management while the previous manager had achieved impressive results. “However, he responded to the challenge with élan.”
Srinivas adopted a research-intensive investment approach, the report says, pointing out that he had a solid experience as a research analyst. His strategy combines top-down and bottom-up analyses and while picking stocks, “he looks for quality companies with strong business models that enjoy sustainable advantages in the form of entry barriers, low cost of production, and capable management teams.”
Fund: ICICI Prudential Focused Bluechip Equity Retail
Overall Star Rating: 
Morningstar Analyst Rating:
Manager Prashant Kothari runs a concentrated portfolio after picking stocks with rigorous analysis using various measures such as discounted cash flow to arrive at his estimate of value and also uses qualitative filters to eliminate firms with poor corporate governance, management or high leverage, says the analyst report.
The fund’s high-quality bias may also help the fund outperform in down markets but of late, the surge in assets, thanks to the fund’s success, may lead to liquidity issues, which the manager is already working at to address.
“Nevertheless, we are fairly impressed with Kothari’s stock-picking ability and disciplined investment approach, and we believe his investment style will keep the fund in good stead going forward.”
Fund: ICICI Prudential Infrastructure
Overall Star Rating: 
Morningstar Analyst Rating: 
The term “infrastructure” is vague and for this fund, it includes the entire Indian universe expect pharmaceuticals, media, technology and consumer staples.
Prashant Kothari, who took over the fund from S Naren in February 2011, focuses on high-quality stocks, “a step in the right direction, given that stocks from the infrastructure sector are prone to intense cyclicality”, says the analyst report.
Compared to the previous manager, he embraces a wider buy-and-hold approach and says he will stay away from taking major cash calls. “While we think the fund is heading in the right direction, it’s too soon to have much conviction in it.”
For the complete list of funds currently under analyst coverage, click here.