Prashant Jain’s 3P Fund hikes stakes in financials, energy; pares IT on growth and valuation worries

Prashant Jain’s 3P India Equity Fund has sharpened its focus on financial services and energy stocks in the June quarter, while cutting back on information technology names amid elevated valuations and patchy growth prospects. The fund, steered by the veteran fund manager and former HDFC Mutual Fund CIO, remains anchored to its core principles of investing in fundamentally strong, reasonably valued businesses.

As of June 30, assets under management (AUM) of the 3P India Equity Fund 1 stood at Rs 14,849 crore — up Rs 1,633 crore during the June quarter — contributing to a total AUM of Rs 19,167 crore across all 3P funds.

Returns and positioning

Since inception in May 2023, the flagship equity fund has clocked a CAGR of 29.6%, handily beating the Nifty 50 TRI’s 18% and the Nifty 200 TRI’s 21.9%. Over the past one year, while returns have moderated with broader market softness, the fund still delivered a 10.6% CAGR, compared to 7.5% for the Nifty 50 TRI and 6% for the Nifty 200 TRI.

“The first year’s performance benefited from an underweight stance in consumer staples and overweight in capital goods and utilities,” noted Prashant Jain (CIO & Fund Manager) and Ashwani Kumar (Portfolio Strategist & Co-Fund Manager) in the latest investor newsletter. The duo added that “a reduction in SMIDs, utilities and financials, and selective additions in pharma aided second-year relative performance.”

Sector Moves: More Financials, Less IT

The fund increased its exposure to financial services to 5.7%, up from 3.6% in the previous quarter. New entries include Capri Global and a re-entry into Power Finance Corporation (PFC), a name Jain had previously exited before its recent correction. During his HDFC Mutual Fund days, Jain was known for his early bullish bets on power financiers like PFC and REC.

Energy allocations rose from 8.3% to 9.6%, led by larger weights to Reliance Industries and Coal India.

Conversely, allocation to software and services declined sharply — from 12.1% to 9%. The fund exited Wipro and trimmed its Infosys stake, citing high valuations and low visibility on earnings. Hexaware made its way into the portfolio in place of Wipro.

Banking Stays Dominant

Banking continues to be the fund’s largest sector bet, with exposure exceeding 31%. Core holdings include HDFC Bank, ICICI Bank, State Bank of India, Axis Bank, and Kotak Bank. No major changes were made in this segment during the quarter.

The fund maintained an underweight stance on consumer staples, materials, automobiles, and software & services, and stayed overweight insurance and pharmaceuticals. Auto exposure was trimmed due to weak volume trends and uncertainties around EV adoption.

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Smallcap Tilt Rises, But Focus Still Largecap

Smallcap exposure increased from 10% to 13.4% based on “bottom-up views,” while cash holdings dropped to just 0.3%. Still, largecaps make up nearly 80% of the portfolio, reflecting the fund’s conservative core.

The number of portfolio holdings remains around 50. “Unique portfolio holdings have marginally reduced in the quarter. We think there should be some more consolidation over time. However, meaningful reduction will have to wait till there is divergence in some pockets,” the newsletter said.

The fund continues to avoid commodity bets, loss-making tech, and faddish themes. “Sustainability of businesses and valuations are the two cornerstones of our investment philosophy,” Jain and Kumar emphasized. “Our approach avoids pockets of excessive valuations or companies where implied growth expectations are unrealistic,” the managers said, reiterating their focus on long-term risk-adjusted returns.

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