Insights

FundsIndia Recommends: Birla Sun Life Frontline Equity

July 16, 2013 . Vidya Bala

On the front line for over a decade

Birla Sun Life Frontline Equity is among the handful of equity funds with over a decade’s track record. While quite a few funds with such a record have fallen by the way side, this fund managed to chug along well, keeping itself in the top quartile of the performance chart.

This large-cap focused fund delivered 15% annually in the last 5 years, convincingly beating its benchmark S&P BSE 200 by a good 6 percentage points.

Suitability

Birla Sun Life Frontline Equity is suitable for an investor’s core portfolio. That said, if your priority is to minimize volatility in your portfolio, then another more established player – Franklin India Bluechip, must be your first choice.

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The standard deviation, or a fund’s deviation from its mean returns, is higher for Birla Sun Life Frontline Equity than for Franklin India Bluechip, suggesting that it is relatively more volatile. But this feature also makes the Birla fund an ideal candidate for investing through SIPs as it averages rupee costs well when its NAV falls and gains. Its 5-year SIP return is superior to that of Franklin India Bluechip for this reason.

Performance

performanceBirla Sun Life Frontline Equity beat its benchmark 88% of the times on a rolling one-year return basis since its inception in late 2002. While that is a good show, it ramped up performance in the last 3 years, when it did not once underperform its benchmark, even as returns were similarly rolled. Clearly, the fund has, in recent years, been trying to demonstrate better consistency in performance.

In terms of its risk profile, the fund is somewhat closer to HDFC Top 200, although the latter may have marginally higher exposure to mid-caps than the former. Both the funds also share a common benchmark.

Given that its benchmark BSE 200 is a tough index to beat (considering that Birla Sun Life Frontline Equity invests predominantly in large-cap stocks), especially in a rallying market, the fund has mostly beaten its benchmark in years of up market only by 2-3 percentage points.

But it improved on this score in 2012, beating the benchmark by a convincing 5 percentage points. Overall, it adequately made up for this marginal outperformance by containing declines well in market falls such as the ones in 2008 and 2011. It fell 5-7 percentage points lower than the benchmark in those years.

Portfolio

portfolioBirla Sun Life Frontline Equity contained declines well, but mostly by holding a higher position in cash and debt. For instance, in the market low of March 2009, which was when the turnaround started, the fund held as low as 73% in equities, in contrast to the over 90% held by Franklin India Bluechip. Similarly, in end-2011, when markets received a beating that year, the fund held about 91% in equities, even as bold ones likes HDFC Top 200, went all out with an almost full equity exposure.

But thus far, the fund has not paid much of a price for this approach as the returns tend to normalize over a longer term.

Birla Sun Life Frontline Equity reduced exposure to consumer-oriented sectors such as automobile and auto ancillaries between December 2012 and June 2013. This may have helped to some extent as these sectors took a beating in the market fall year to date.

It is also among the few funds that managed to stay away from negative turf on a year-to-date basis.

The fund marginally reduced exposure to banking and finance space in the wake of rate uncertainties and upped exposure to FMCG and pharma. Holdings in IT remained about the same.

The fund also appeared to fancy the energy space and held stocks such as Alstom, Power Grid Corporation of India, Cairn India and Oil India. While exposure to infrastructure and capital goods stocks was not high, it held quite a few stocks (with less than 0.5% holding) such as Adani Ports, IL&FS Transportation Networks and Jindal Steel & Power from these spaces.

The fund is managed by Mahesh Patil.

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18 thoughts on “FundsIndia Recommends: Birla Sun Life Frontline Equity

  1. madam,
    i am an investor of this fund and recommend the fund to others being convinced of the performance.thanks for highlighting the fund for the investors.it a timely article and i appreciate the effort taken to research

  2. Madam,
    A wonderful article on BSL frontline equity… !! I am investing in birla sun life 95 , a balanced fund …. What is your view on this fund madam? I find that bsl 95 is more volatile compared to other balanced funds..

    1. hello Joseph, Yes it is a bit volatile compared with balanced funds from HDFC, Tata or Canara Robeco. tks, Vidya

  3. Hi Vidya,

    Thanks for the nice article.
    I was just wondering if you can elaborate how does this funds stands vis-a-vis ICICI Prudential BlueChip(Large cap fund).

    Also if one has invested in icici blue chip, will it make sense to invest in Birla frontline equity as well.

    1. Hi Rohit,ICICI Pru Focused Bluechip has a superior risk-adjusted return if you take recent years. Just that it does not have as long a track record as BSL. Hence, if you are invested in ICICI Blue I would think it should do. Vidya

  4. Hi Vidya,

    Thanks for the article.

    I invest in BSL Frontline Equity for SIP (Rs 8000) and also ICICI Focussed Bluechip SIP (Rs 8000). I monitor these funds on a daily basis. I have seen in the last 8 month and in general since the earlier fund manager of ICICI Focused Bluechip left (Jan 2012), that BSL Frontline Equity has outperformed Focussed Bluechip.

    I am thinking of shifting from ICICI focussed Bluechip to BSL Frontline. Do you think it is good idea or shall I start SIP in Frankline India Blue (as suggested in the article)?

    Thanks,
    Abhishek

    1. Hi Abishek,

      ICICI Pru Focused Bluechip is an equally good fund with a good risk-adjusted return. Just that it does not have that long a track record. You should probably continue with the same set of funds, if you have a time frame of at least 5 years and have a reasonable risk appetite. Given your age, you could probably handle little volatility and need not necessarily resort to Frnaklin India Bluechip.
      In future, I would request you to use our ‘Ask Advisor’ feature to route your fund queries so that we can track them and respond more systematically.
      Tks, Vidya

  5. Hi Vidya

    The article is very worth reading about the comparision of large caps funds, no doubt both the funds have well demonstrated with around 13 % returns (i guess). Am investing in the FT india blue chip fund and DSPBR top 100(large caps) in sip since 2007, Do you feel i should shift from DSPBR top 100 to BSL Frontline equity fund(as per your recommendations of the fund in BSL front line eq) Whats ur opinion on the same? How abt DSPBR top 100?

    Pls reply me

    1. Hello Satish, If youa re doing an SIP in DSP BR top 100, you can consider a hold on the fund and move fresh SIPs to BSL. DSP BR has slipped a bit and requires watching. In future, kindly route your portfolio queries using the ‘Ask Advisor’ feature in your account (click help tab) so that we can track queries as well as our responses to it. tks, Vidya

    1. Hello sir,

      Thanks.Our Portfolio review and fund advisory service is made available through the ‘Ask Advisor’ feature (in their activated FundsIndia account) available for free to all FundsIndia customers. Tks

  6. HI mam

    i am investing in this front line eqity fund.and if i invest my money for next 10 years in face of sip.what return i will get approximetly….

    Regards,
    Arjav Desai

    1. Hello arjav, We cannot forecast returns. In the past, large-cap funds have delivered not less than 12% annually for the time period you mentioned. The said fund has delivered much more. Tks.

  7. Hi Bala
    I want to invest in large cap fund for 10yrs but I am confused between BSL FRONTLINE and SBI blue chip, which one to consider? is it worthy to split my investment equally in both these funds?

  8. Hi Bala
    I want to invest in large cap fund for 10yrs but I am confused between BSL FRONTLINE and SBI blue chip, which one to consider? is it worthy to split my investment equally in both these funds?

    1. Hello Sir, If you a FundsIndiainvestor, please write to us using your account (help tab, advisor support). We are constrained from giving individual portfolio recommendations here. thanks, Vidya

      1. Hello Vidya,

        Which is best among below funds:
        1.Birla sunlife front line
        2. Franklin India blechip
        3. Icici pru focussed Bluechip

        For 15 yers time horizon

        1. Rahul, Thanks for writing in. Portfolio recommendations are done only if you route them through your FundsIndia account, if you are an investor.

          thanks,
          Vidya

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