Mutual Fund - Prudential ICICI Dynamic Plan-Growth Fund : Analysis

Prudential ICICI Dynamic Plan-Growth

Name: - Prudential ICICI Dynamic Plan -Growth Type: Open-Ended equity fund Fund Manager: Mr. Anil Sarin Inception Date: October 18, 2002 Prudential ICICI Dynamic Plan was launched in October 2002 and seeks to generate capital appreciation by actively investing in equity and equity related securities. However, for defensive considerations, the scheme may invest in debt, money market instruments and derivatives. The distinguishing feature of the scheme is that it has the flexibility to move its assets between equity, debt and liquid as per the market conditions and could invest 0-100% in equity & equity related instruments and 0-100% in debt, money market and cash. But since its inception, the fund managers have been bullish on the equity side and kept a higher allocation towards equity. Its average equity exposure since inception has been around 89.86% and the lowest it has gone is to 75%. As on May 2006 it has invested 89.76% of its assets in equities, 1.2% in debt and rest in cash and equivalent.

Performance as on June 26, 2006   Simple Annualized Compound Annualized Scheme Name 6 Months 1 Year 2 Years 3 Years Since Inception Prudential ICICI Dynamic Plan -G 15.69 61.92 70.35 56.82 53.01 Peer Group Average- Equity Diversified 5.53 40.73 52.78 53.70 21.68 S&P Nifty 8.48 38.78 43.90 41.00

The fund's performance has truly been dynamic. An actively and aggressively managed scheme has outpaced its benchmark and peers by a mile. Its one year return at 61.92% is far superior to the returns posted by benchmark and average diversified equity funds. Judicious mix of stocks across the market capitalisation and well diversified portfolio explains the performance. Its asset base has grown manifold from Rs 313 crore to Rs 1044 crore in last one year.

The scheme has well diversified portfolio spread across 52 stocks and follows growth and blend style with exposure to large caps, midcap and small cap stocks. As on May 2006 top 10 holdings account for 34.50% of the portfolio with Reliance Industries in top place. Other top holdings in its portfolio include Deccan Chronicle Holdings, Jain Irrigation System, State Bank of India and Sterlite Industries. Over a period of one year it hiked exposure to Engineering and Auto sector while pared in IT sector. ITC, Tata Steel, Infosys, Punjab National Bank etc. were some of the stocks that made fresh entry into the portfolio while Reliance Energy, Ranbaxy, Jindal Photo Films and Reliance Natural Resources Ltd. made an exit from the portfolio. However due to frequent churning of the portfolio the turnover ratio has gone up compared to the typical diversified equity funds. Top five sectors in its portfolio are Diversified, Computer, Bank, Engineering and Miscellaneous sector and account for more than 50% of net assets. Few of its stocks EID Parry, Deccan Chronicle, JaiPrakash Associates have appreciated significantly.

Minimum investment required to enter the scheme is Rs 5000 and offers dividend, growth and FII options .It charges an entry load for investments of 2.25% for investment below Rs 5 crore while no exit load is levied. The scheme is benchmarked against S&P Nifty. Expense Ratio of the scheme as on May 31, 06 is 2.03% and is lower than the category average of 2.16%. Prudential ICICI Dynamic Plan has the option to move its assets into cash and debt instruments upto 100% to minimize the downside in bearish market. This looks interesting seeing the current state of the market but at the same time requires the fund manager to take a call not only on the stocks but on the future course of equity and debt markets. The scheme's performance so far has been encouraging. However, it shows high risk profile compared to typical diversified equity funds and is suitable for aggressive investors.