SBI Bluechip Fund Direct Growth INF200K01QX4

SBI Bluechip is a relative return strategy focused on finding incremental fundamental change, positive market expectations, and relative valuations, as measured by sales growth, EBITDA margins, and market share changes.

The fund predominantly adheres to a blended approach, with a slight inclination toward growth and quality stocks, emphasizing long-term growth prospects (three to five years) in the companies it holds. The manager avoids momentum-driven ideas and instead focuses on meticulous bottom-up stock selection, prioritizing enduring value over short-term market fluctuations. The in-house model portfolio forms the basis for stock picks and consists of the analyst team’s best ideas. Valuations are looked at on an absolute basis relative to the stock’s 10- and five-year history.

Broadly, the overall framework and philosophy plied by Saurabh Pant is on the same lines as erstwhile manager Sohini Andani. The fund continues to be biased toward quality and growth while being conscious of valuations. However, there are some differences, primarily on the execution side. Andani adopted a classic buy-and-hold approach while backing her conviction and enduring bouts of underperformance as long as the overall thesis was still intact. This approach rewarded her favorably. Pant has a slightly different approach, being more prudent in terms of profit booking during market rallies. He also looks at certain segments from a medium-term perspective as long as they fit his framework on a risk/reward basis. We can expect to see a slight uptick in the portfolio turnover going forward, but not by much.

Pant has plied almost a similar relative return framework in the large-cap segment of SBI Large & Midcap, which is a comforting factor. Our confidence in the process stemmed from Andani’s consistent application of her framework complemented by her execution skills. The framework has by and large remained the same under Pant, we need evidence on the execution side of things before gaining confidence. We have downgraded the Process Pillar to Average from Above Average.

Saurabh Pant prefers to build a diversified portfolio of 50-60 names: around 80%-85% in large caps and the remainder in mid- and small caps, in line with the category’s mandate. The way mid- and small-cap businesses are selected in this fund has more to do with how they are placed on the growth visibility and risk/reward matrix viz-a-viz its large-cap counterpart in the same sector. Pant is quite patient with his mid-cap segment, giving it sufficient time to compound.

The fund continues to be benchmark-aware, with an internal sector limit of 10% and a stock limit of 5% versus the index. The manager uses the analysts/sector specialists’ views as a guiding factor for assigning specific sector weightings. While the overall framework is stable, the way the portfolio is positioned changes based on the economic and market scenario.

Liquidity is not a major concern with the fund given its large-cap nature. That said, given the fund's size, its ability to buy into mid-/small-cap businesses meaningfully could become a hindrance. We would like more time to evaluate how Pant maneuvers this fund going forward in line with the framework and to evaluate his execution skills.