Mutual Fund - Birla Sun Life Basic Industries Fund : Analysis

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Investors can retain their investments in Birla Sun Life Basic Industries. Its consistent performance over the three- and five-year periods makes it a good investment choice.

There was, however, a change in the scheme's management in November, warranting a wait and watch approach before committing any fresh investment.

The portfolio has not witnessed any major shuffling in stocks or sectors for now, indicating that it may continue to follow a similar strategy. The fund's objective is to invest in companies sensitive to economic and commodity cycles also termed as cyclical companies. The portfolio appears to be a mixture of value and growth stocks.

Suitability: Since the fund prefers to invest in cyclical stocks its performance depends on its ability to identify stocks/sectors that are on an uptrend. Hence, the fund is suitable for investors with above-average risk appetite.

Performance: With a one-year return of 78 per cent, the fund has outpaced its benchmark BSE-200 by 11 percentage points. It has registered strong performance over a five-year period.

On a monthly return basis over the past 24 months, the fund trailed its benchmark only nine times, reflecting fairly consistent performance.

Investors who opted for a systematic investment plan (SIP) would have earned fifty percentage points more than those who made a lump-sum investment, over a one-year time-frame.

An investor who chose the SIP route since inception would have earned a compound annual return of 50 per cent as against 37 per cent through one-time investment (as of December 2007).

Profile: The fund has witnessed some outflows over the past year. Despite a surge in the NAV the fund's assets under management witnessed a decline of 18 per cent.

With a compact asset size, the fund has managed to build a well-diversified portfolio 41 stocks. Exposure to any single stock is pegged at less than 7 per cent of the portfolio.

Sector exposure however appeared less diversified with the top three sectors cornering close to 47 per cent of the assets. Capital goods continued to account for one-fifth of the assets. The NAV per unit is Rs 120.6.

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Mutual Fund - SBI Bluechip Fund : Analysis

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The objective of SBI Bluechip Fund is to invest in a diversified basket of stocks whose market capitalisation is at least equal to or more than the benchmark BSE 100.

Despite the trend of large-cap stocks outpacing the mid and small cap segments in the past year, this fund under-performed the benchmark by a significant margin.

For a one-year period, the fund has generated a return of 41 per cent and trailed the benchmark by 21 per cent.

The recent performance merits a review of investments in the fund.

Investors can consider a switch from the fund into Magnum Contra from the SBI table.

This fund has good track record over a five-year period with a compounded annual return of 72 per cent.

Magnum Contra predominantly invests in large-cap stocks, with only 20 per cent of assets invested in stocks with a market capitalisation of less than Rs 7,500 crore, as per the latest factsheet.

Magnum Contra also ranks better on consistency of performance.

SBI Bluechip Fund is benchmarked against the BSE-100 and it has trailed its monthly returns in 15 out of the past twenty-one months. Magnum Contra, on the other hand, despite being benchmarked against the same index, has trailed in just seven of the 21 months.

However, one positive aspect of SBI Bluechip Fund is that during the market corrections in May 2006 and March 2007, it contained losses better than the benchmark.

Portfolio Overview: SBI Bluechip Fund had a record collection during its new fund offer (NFO). It has collected over Rs 3,000 crore. Since inception, however, the fund has witnessed outflows and a significant drawdown in asset size; as per the December fact sheet, it stood at Rs 1,572 crore.

The fund had 42 stocks in its portfolio and the top three sectors — energy, financial services and industrial manufacturing — accounted for 40 per cent of the assets. It predominantly invests in large-cap stocks, with a market cap of over Rs 7,500 crore.

Over the past quarter, the fund has pruned exposure to the IT sector and stepped up exposure to construction. It had a sizable exposure to the pharma sector.

IVRCL Infrastructure, Hindustan Construction and Patni Computers were the stocks from the mid-cap space.

Fund facts: The fund was launched in February 2006. It is managed by Mr Pankaj Gupta. The NAV per unit is Rs 16.5

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Mutual Funds - ICICI Pru Services Industries Fund - Analysis

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ICICI Pru Services Industries is an open-ended equity scheme that seeks to invest in companies belonging to the service industries across various market capitalisation segments.

Over the six months ended December 2007, its assets expanded 50 per cent and the NAV moved up 40 per cent.

Here is a look at the portfolio churn in the above period.

In the past six months, the fund trebled its exposure to the construction sector.

Holdings in Patel Engineering surged four-fold, the stock cornering 7 per cent of the portfolio. The fund added recently-listed Maytas Infrastructure to the portfolio, along with Indiabulls Real Estate and Orbit Corporation.

Exposure to banking space moved up marginally. ICICI Bank, HDFC Bank and Bank of Baroda were accumulated while PSU banks Andhra Bank, Punjab National Bank and Union Bank of India moved out. State Bank of India was added afresh.

Asset allocation to the IT sector declined marginally. Holdings in mid-cap stock Nucleus Software were pruned by more than 50 per cent even as Mphasis BFL Software moved out completely. NIIT and Satyam Computer Services were new additions.

The fund appeared to vary its strategy in the capital goods space. During the market correction in February 2007, exposure to the sector, which was 11 per cent of the portfolio, was brought down substantially.

The fund, however, again increased the asset allocation to the sector over the past few quarters. Larsen & Toubro and Hindustan Dorr-Oliver were the new faces.

The pharma sector, which under-performed the broader market over the past year was pruned substantially.

The fund moved out of large-cap stocks Dr Reddy Laboratories and Sun Pharmaceuticals and instead added small-caps such as Vimta Labs.

Holdings in Reliance Communication were trebled in the past six months. Bharti Airtel did not witness any significant change in exposure.

The huge run-up in the stock price of India Infoline did not deter the fund from accumulating the stock, in which it has enhanced exposure by 50 per cent in the past six months. The recently listed Religare Enterprises was also added afresh.

 

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Mutual Funds - Tax-saving funds for your portfolio- A Report

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If you have not completed your investments for tax-benefit purposes already, you might want to consider adding one or two equity tax saving funds to your portfolio and qualify for deductions under Sec 80 C.

A shorter lock-in (three years) than conventional small-savings schemes and promise of equity-returns, in addition to the tax benefit make ELSS funds appealing options for those with a higher risk appetite.

Such investors can consider a small allocation to tax-saving funds within the overall Rs 1,00,000 limit. But such investments can be made after exhausting conventional options such as PPF, bank fixed deposits and other small-savings instruments.

Suitability: Most tax-saving funds have the Sensex, Nifty or the BSE-100 as their benchmark. But they tend to invest across market capitalisation ranges, with a substantial exposure to mid-cap stocks. Barring one or two funds, most of them invest at least 40 per cent of their assets in stocks with a market capitalisation of less than Rs 8,000 crore. Most of these funds sport a small asset base, which enables them to take advantage of opportunities in the mid-cap space. However, this also makes them more risky than a typical diversified fund.

Funds such as Magnum Tax Gain, Fidelity Tax Advantage, HDFC Tax Saver and Reliance Tax Saver have grown significantly in size in recent years, with their asset bases each greater than Rs 1,000 crore. Such funds now invest in a more even blend of large-cap and mid-cap stocks, as their size limits them from taking too heavy an exposure to mid-cap stocks.

Considering their higher risk profile and the lock-in period, it might be better to take the SIP route to investing in these funds.

Performance overview: A good number of tax-saving funds have outperformed the Sensex and the Nifty over the past year, but not by a huge margin. Despite a significant exposure to mid-caps however, their performance vis-À-vis the broader indices is not as impressive. Only four in 10 funds in the category outperformed the BSE-200 in this period.

In terms of performance, tax-saving funds, as a category, have largely kept pace with diversified funds over one-, three-year and five-year periods. However, there is a significant divergence in performance within the category.

In fact, while almost 20 funds have a prior performance record of five years and more, only a handful has managed to consistently beat the market during this period.

Magnum Taxgain, Sundaram Tax Saver, Birla Sun Life Tax Relief '96, Principal Personal Tax Saver and Principal Tax Saving fund outperformed the BSE-200 in at least four out of five years. These funds maintained their lead over the market over the past year as well.

Preferred picks: Magnum Taxgain, Sundaram Tax Saver and Birla Sun Life Tax Relief '96 are among our preferred picks. Magnum Taxgain has gained a more large-cap focus in recent years, owing to a swelling asset base.

It figures somewhere in the middle of the fund rankings over a one-year period. Nevertheless, it remains among our preferred funds owing to its superior long-term track record.

There are other funds that have a good five-year track record but have slipped in the last two years, such as ICICI Prudential Tax Plan, HDFC Tax Saver and HDFC Long Term Advantage. Investors may wait for a pick-up in performance in these funds before contemplating fresh exposures.

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Mutual Fund - ABN Amro Equity Fund : Analysis

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Investors can retain their holdings in ABN AMRO Equity Fund. The fund has set an impressive pace of performance since launch three years ago. The annualised return of 53 per cent has outpaced the benchmark Nifty by ten percentage points. Investors may consider the fund for their core portfolio once it builds a track record across a complete market cycle.

Suitability: The fund is suitable for aggressive investors. Over the past one year, the fund's portfolio has been churned aggressively. On average, at least seven new stocks were added every month, over the year.

The fund invests actively outside its benchmark, holding close to 50 per cent of its portfolio in stocks outside the Nifty. Investors who prefer to take exposure to a flexi-cap fund can consider this one as a diversification option. The fund recently witnessed a change in fund manager, which also may call for a wait and watch attitude.

Performance: Over a one-year period, the fund's NAV has grown by 73 per cent, outperforming its benchmark by 16 percentage points. On a year-to-year basis, the fund outpaced its benchmark in two out of the past three years, slipping up in 2006. It has consistently outpaced the category average over this time frame. The fund's asset base has also been quite volatile in this period.

Assets stood at Rs 350 crore during November 2006 but when the markets underwent a correction in February 2007, the fund appears to have witnessed redemption pressures and the assets in March 2007 stood at Rs 145 crore. The fund has, however, seen fresh inflows in the past year, with the asset base growing to Rs 350 crore in September 2007. Recent months have again seen outflows from the fund.

Portfolio: The fund has a compact portfolio, consisting of 40 stocks. Petroleum, construction and banks were the preferred sectors in the latest portfolio.

The fund was underweight in the market-favoured sectors such as capital goods and power stocks in the past one year. IT stocks too saw exposure brought down substantially in the past six months. Exposure to any single stock was restricted to less than 10 per cent of the assets. Mr Amit Nigam manages the fund. The NAV per unit is Rs 48.12.

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Mutual Fund - HSBC Equity Fund : Analysis

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HSBC Equity Fund, which seeks to invest predominantly in large caps, has completed five years since inception and has consistently outperformed its benchmark — the BSE 200 — over one, three and five-year periods. Like many diversified funds, HSBC Equity has invested in about 30 stocks, making it a compact fund to monitor.

A look at the fund over the six-month period, May to November, reveals that the fund's corpus has increased by 39.7 per cent to Rs 1,385 crore, while the NAV has improved by 42.8 per cent to Rs 107.24.

Sector Moves: The sectors included appear diversified with a few 'in' theme sectors and some contrarian themes, with fair growth prospects.

Banking (12.6 per cent), a sector that has done very well over the past year, is the top sector in the portfolio. In construction, another high-growth sector, exposures have been doubled over the six-month period and stand at 8.3 per cent. Cement sector exposures have been hiked. Interestingly, consumer non-durables sector — FMCG is a newly added sector and amongst the top holdings (5.6 per cent) for the fund. The bet here may be that consumption-related themes may perform well in the coming year, after the recent under-performance. Ferrous metals have seen exposures increase over three times to 4.2 per cent. Telecom services, which was the top sector in May, has seen slightly reduced exposure but is still among the top holdings of the fund.

Software, a key sector six months ago, has seen exposure being reduced by over a third in recent times. Similar is the case with media, where select stocks have seen a sharp appreciation in recent times. Interestingly, capital goods, the flavour of the market in recent months, have seen exposures reduced substantially to 5.2 per cent. Tightening interest rates appear to have seen a reduction in the automobile sector exposure.

Stock Moves: Most of the stocks selected by the fund comprise leading names of India Inc. ITC (3.3 per cent), which was not present in the fund in May, finds itself in the top ten holdings now. Colgate, another slow-moving FMCG stock, also figures in the portfolio. Tata Power, that has doubled in six months, has seen added exposures. Aban Offshore is also a fresh addition.

Welspun Gujarat, another stock that has doubled in price, and TV-18 are new stocks from the mid-cap segment. Axis Bank, ICICI Bank and Sesa Goa are some other important additions. Idea Cellular and Satyam Computer, which have delivered lukewarm performance, find themselves out.

Reliance Industries (6.4 per cent), every fund house's blue-eyed boy, has remained the top holding for the fund, though weights relative to the benchmark are low.

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Mutual Fund - DWS Investment Opportunity Fund : Analysis

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Investors in the DWS Investment Opportunity Fund can retain their units in the fund, given its strong performance since launch. With a compounded annual return of about 45 per cent since launch, the fund has kept comfortably ahead of its benchmark BSE-200 as well its peer group of diversified equity funds.

A one-year return of about 80 per cent makes the fund a top performer within the diversified category for the past year. Since its inception, the fund has been among the better options within the universe of flexicap funds (funds which can invest across the market capitalisation range).

A compact size, that has enabled the fund manager to shift nimbly between large-cap and mid-cap stocks, good stock selection and active churning of the portfolio have helped the good performance.

Suitability: The fund's risk profile would be akin to that of a normal diversified equity fund. Unlike other funds labelled as "Opportunities" products, DWS Investment Opportunity does not hold concentrated exposures in its top sectors.

Instead, the fund's mandate allows it to dynamically allocate its portfolio between equity and other assets; equity exposure in the portfolio can decline as low as 5 per cent.

This requires timing skills and can add an additional layer of risk to the fund. In practice, though, the fund has remained fully invested in recent times and hasn't taken recourse to timing calls. However, it has been quite aggressively managed in active churning of the portfolio and a flexible allocation to mid-cap stocks.

Performance: The fund has managed a one-year return of 85 per cent, with a three-year CAGR of 55 per cent. The fund is among the few flexicap funds to figure among the top performers for the past year. This is probably explained by its well-timed move into mid-cap stocks, with a bias towards capital goods, metals and banks in the past six months.

As a proportion of the overall portfolio, the mid-cap exposure (stocks with market cap of Rs 7,500 crore or less) has climbed from 34 per cent to 56 per cent over the six months to December. Over the past quarter, for example, large-cap names such as Tata Power, ITC, and Grasim were shed in favour of new adds such as Marg Construction, HCC and Gujarat Industries Power.

These moves are likely to have helped performance, given the narrowing valuation gap between mid-caps and large-caps in recent months. The portfolio also appears to be quite actively churned, with 21 of the total of 39 stocks held in the portfolio replaced in a six month time frame.

An active profit-booking strategy has probably been necessary in this period, given the sharp run-ups in select mid-cap stocks. A small asset base has proved an advantage, both in terms of manoeuvrability of the portfolio and quick switches into promising mid-cap ideas.

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Mutual Fund - HDFC Prudence: Fund - Analysis

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HDFC Prudence, a balanced fund, appears to be a good investment option for conservative investors based on its performance since inception. The fund, over a five-year period, has outpaced the BSE Sensex by five percentage points and its benchmark Crisil Balanced Fund Index by 25 percentage points. The improved returns from debt over the past two years could have partially helped the fund's return in recent periods.

Suitability: The fund appears a good option for investors strategically trying to balance investments between debt and equity. . HDFC Prudence's mandate permits the fund to invest 40-75 per cent of the assets in equity. To avail of the tax advantage available to equity funds, Prudence usually invests 65 per cent in equity, with equity allocation currently at 75 per cent. Within equity, the fund has a substantial investment in mid-cap stocks with market capitalisation of less than Rs 7,500 crore. Its exposure to debt, however, makes it less risky than a typical diversified equity fund.

Performance: The fund has generated a return of 23.7 per cent for the past year and has trailed its benchmark marginally. This can be attributed to the fact that it was underweight on construction and power sectors.

However, during the January correction, the fund was able to contain declines better than the market, with its NAV declining only 13 per cent whereas the CNX Midcap has shed close to 22 per cent. The fund has performed consistently and in the past twenty-four months, on a rolling returns basis, the fund has outperformed the benchmark about 60 per cent of the time.

Portfolio Overview: The fund has a well-diversified portfolio, with the top 10 stocks accounting for 42 per cent of the equity portion. Banks, Capital Goods and Auto Ancillaries were the preferred sectors.

In all, the fund has 19 sectors in the portfolio. The fund's debt allocation sports a higher tilt towards corporate debt. With the interest rate peaking, the debt component may be able to deliver better returns and lend support to overall performance. The fund's average maturity of its debt is 2.75 years and any weakness in interest rates may be positive for performance.

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Mutual Fund - Birla Sun Life Tax Relief Fund : Analysis

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Investors looking for tax saving options for their portfolio can consider the Birla Sun Life Tax Relief 96, in the light of its good recent, as well as five-year, performance record. The fund carries a three-year lock-in period common to all tax saving mutual funds.

Its recent performance has been significantly superior to the tax planning as well as diversified equity fund category average. The fund sports one-year and three year returns of about 41 per cent on an annualised basis, well above the 38 per cent and 36 per cent, respectively, managed by its benchmark index — the BSE 200. Returns for these periods are also well above the category average for diversified equity funds.

Suitability: Amidst the widely divergent and often aggressive strategies pursued by tax planning funds, Birla Sun Life Tax Relief has adhered to a fairly conservative strategy in recent years. For one, exposure to top mid-cap stocks has been restricted to less than a third of the assets managed, over the past two years.

Two, the fund has stayed with most of its stocks for extended periods, with limited churn in holdings over the past year. The fund, however, does hold a fairly focused portfolio with the top three sectors accounting for nearly half of the assets and the top five stocks accounting for a third of the portfolio. However, a preference for frontline stocks restricts the risks associated with such a strategy. Overall, the fund would fit an investor with an average appetite for equity risk.

Performance: The fund's returns since its launch in 1996 are nothing short of impressive, though it has faced its share of ups and downs over this 12-year period. An initial investment of Rs 1,000 in this fund has grown to Rs 1.1 lakh as of January this year.

However, investors entering the fund at this juncture would have to substantially temper their expectations, given that stock market returns of the past three years may not be replicable. Investors should also note that the fund's track record over its initial five-year period is not relevant now, as the fund has witnessed both ownership (moving from Alliance Capital to Birla Sun Life) and fund manager changes. On this score, the recent performance record, as well as stock choices, are confidence-inspiring.

Over the past year, the fund has retained a clear preference for the better-known names of India Inc, whether from the large cap or mid-cap basket. Stocks such as L&T, Reliance Industries, ICICI Bank and Reliance Energy from the index basket have been held along with mid/small caps such as United Breweries, ICRA and India Infoline among the fund's top holdings.

Mid-cap exposures have risen in the past six months, from about 26 per cent of assets to 38 per cent over the past year. This is probably because of more attractively valued stocks in this space, relative to large caps. However, with the mid-cap exposure capped at 38 per cent even in the January portfolio, the portfolio retains a tilt towards large-caps.

The fund has also opted not to churn its portfolio very aggressively over the year, despite the volatile market conditions. Over two-thirds of the holdings have stayed on in the portfolio over the past one year, while only a third of the stocks have been replaced. In terms of sector choices, financials, banks and capital goods have remained the top preferences for an extended period.

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Mutual Fund - Magnum Mid-cap Fund: Analysis

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The year 2008 did not start off too well for the markets, especially for the mid and small-cap stocks. Both bore the brunt of the bear attacks. With markets having undergone corrections, we take a look at how the portfolio of Magnum Midcap has changed over the past six months.

The fund's mandate is to invest in stocks with market capitalisation in the range of Rs 200-2,000 crore. With a secular bull run over the past couple of years, the market cap range of midcaps has, however, undergone a marked change. Over 90 per cent of the fund's investments are, therefore, now in mid-cap stocks.

In the six-month period, assets under management moved by 11 per cent with the NAV witnessing a growth of 15 per cent. Capital goods continued to be in the top slot despite the fund pruning its exposure to the sector. The fund reduced holdings in Crompton Greaves, Bharti Shipyard and Opto Circuits. Recently listed Transformers and Rectifiers was the addition.

The metal space underwent a minor rejig as holdings in Welspun Gujarat Stahl Rohren were pruned substantially. However, the fund accumulated shares of Usha Martin and Maharashtra Seamless. Jindal Saw was retained without any change.

The fund took a cautious stand in the construction sector and reduced holdings in Ansal Properties and Infrastructure and IVRCL Infrastructures by more than 50 per cent well ahead of the market correction. Nagarjuna Construction was, however, accumulated.

In the fertiliser space, the funds appears to have adopted a buy and hold strategy. Deepak Fertilisers, Gujarat Narmada Valley Fertiliser and Gujarat State Fertiliser and Chemicals were retained with marginal change in their holdings.

Cement stocks have been under pressure for almost a year now. The fund moved out of Sagar Cements completely and instead doubled its holdings in Mangalam Cement. India Cements saw accumulation. The fund held on to Kesoram Industries despite the steep correction witnessed by the stock in the last six months.

Asset allocation to the media sector was enhanced over the last three months with exposure to PVR doubling over the past month. During the same period, holdings in Crest Animation Studios were stepped up by more than 60 per cent. The fund trimmed exposure to stocks such as Jagran Prakashan and Shri Adhikari Brothers.

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Mutual Fund - Sundaram BNP Tax Saver - Analysis

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Sundaram BNP Tax Saver is an equity linked savings scheme fund that invests predominantly in large-cap stocks. The fund has been among the top quartile of performers in the ELSS category over the past year. During volatile market conditions over the past six months, it has bettered the performance of peers such as HDFC Tax Saver, Principal Tax Saver and Birla Sun Life Tax Relief 96. The fund's January portfolio reveals that it has over 60 stocks, making for a highly diversified portfolio.

During the period from August 2007 to January 2008, the fund's corpus rose by over 75 per cent to Rs 402 crore, while the NAV per unit increased 31.8 per cent to Rs 39.7. This, despite a dividend payout in December, indicates a net inflow into the fund in this period. The cash position in end-January was at 7.5 per cent of the assets, up from 5 per cent six months ago.

Sector Moves: Financial Services (21.3 per cent) and Energy (19.3 per cent) have remained the top two sector holdings for the August-January period and have also seen increased exposures. Both these sectors have had a good run in the past year. The construction sector exposure has been quadrupled to 7.7 per cent of the portfolio currently, as has been the case with the automobiles sector as well. Consumer goods and metals (the sector which declined the maximum in the January correction) have seen increased exposures. Industrial manufacturing has seen exposures pared to half its earlier levels, while telecom and cement exposures have been trimmed to a third of earlier levels.

Stock Moves: Essar Oil (3.9 per cent), a stock that has tripled in value in the six-month period, was added to the portfolio and is the top holding for the fund. Jindal Steel and Power, Adlabs, and Emkay Shares, three stocks that have clocked over cent per cent returns during this period find their way in. ONGC, BPCL, Unitech, Reliance Capital and Maruti Suzuki are the other important additions.

Many frontline stocks such as L&T, Reliance Petroleum, SAIL and Reliance Communications have exited in this period. Stocks that have had a rather sluggish run in the August-January period, such as Everonn Systems, Zee Entertainment, HUL and Dish TV, have also been shown the door.

Tata Motors, SBI, Reliance Energy, NDTV, Tata Steel, Nestle and Bharti Airtel are key stocks that remained in the portfolio during this period.

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Mutual Fund - Birla Sunlife Equity Fund: Analysis

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Investors can consider exposure in Birla Sunlife Equity as the fund continues to deliver consistent returns. It continues to find a place in the top quartile of the one-year performance chart of diversified funds. Its three and five-year returns of 45 per cent and 58 per cent, respectively, inspire confidence, having beaten the benchmark index — BSE 200 .

Suitability: The scheme's long track record, steady performance after the takeover by Birla Sunlife (the fund was formerly under the Alliance banner) and flexibility to shift across various market-cap segments make it a suitable candidate for the core equity portfolio of a long-term investor.

Birla Sunlife Equity has, in recent times, shown higher volatility, especially on the downside. While in short corrections during 2004 and 2005 the fund declined as much as its benchmark, it declined steeper than its benchmark in the May 2006, February 2007 and the more recent January 2008 corrections. Investors may, therefore, consider routing their exposure through the systematic investment plan to enable cost averaging during volatile phases.

Performance: The fund has returned 36 per cent over the last one year, ahead of the category return of 29 per cent for the same period. It has also beaten its benchmark and the Sensex. That the fund is not among the top performers over the last one year does not appear to be cause for much concern for the following reason: funds that have topped the charts have either been theme funds or those with high concentration on some of the sectors that witnessed strong rally. Such funds have delivered super normal returns of 40-65 per cent while most diversified funds have returned lesser.

Birla Sunlife Equity has a portfolio of about 55 stocks . While several of the stocks do appear richly valued (the portfolio price earnings multiple being 45), a good number of them hold promise over a one-two year period. Crompton Greaves, Thermax, Aban Offshore and Jagran Prakashan are such instances. Over 20 stocks, including the above, have remained in the portfolio for over a year, suggesting that the fund prefers a buy and hold approach in stocks with potential.

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JM Basic Fund: Analysis

The JM Basic Fund may be a good investment option for investors with a high risk appetite willing to take concentrated exposures to stocks in the core and infrastructure sectors. A sharp improvement in the fund's performance in the past year (with a 62 per cent return) has placed it within the top quartile both in the thematic infrastructure fund category and within the universe of diversified equity funds.

The fund's three-year track too has perked up, though the fund still lags many of its peers in the return rankings over a five-year period. The fund has a policy of declaring liberal dividends after periods of high returns. This provides an avenue for investors in this thematic fund to lock into gains when the theme outperforms, reducing the need to book profits by redeeming units. The dividend option may be preferred over the growth option.

Launched initially as a sector fund that would focus on energy stocks with a very limited investment universe, JM Basic has later broad-based its investment objectives to invest in a range of sectors that fit the broad categorisation of "basic" industries.

The definition of "basic" is sweeping, with the portfolio featuring holdings in financial services, packaging and commodities apart from conventional core industries such as engineering, metals and capital goods. This more diversified profile helps contain risk, to some extent.

Suitability: A clear preference for mid-cap stocks over large-caps and concentrated exposures to its top sectors and stocks makes JM Basic Fund suitable only to a fairly aggressive investor. The fund's portfolio strategy suggests that returns may witness greater volatility over the short-term, than the normal diversified fund.

The fund has however, managed downside risk reasonably well during the recent market correction, containing the decline in NAV to about 21 per cent from the January 8 peak, even as the BSE Capital Goods Index fell by about 22 per cent.

Portfolio strategy: Sectors such as construction, capital goods and metals have been the fund's key choices within the basic theme, even as it has largely stayed away from sectors such as power generation and oil and gas.

The fund has also displayed a clear partiality to mid-cap stocks, probably with the conviction that mid-caps rather than frontline stocks will outperform over the next few years. 86 per cent of the fund's end-January portfolio was invested in mid-cap stocks, with a market capitalisation of less than Rs 7,500 crore.

This was up from 77 per cent in August 2007 and 69 per cent in March 2007. Good performance has led to steady inflows and a swelling corpus size over the past year, with the current asset base at Rs 1,311 crore (end-January).

The expanding corpus has prompted the fund to expand the number of stocks in the portfolio though it still remains compact, at 35 stocks.

Though the sector holdings remain focussed (top two accounting for 40 per cent of assets), the fund has taken to holding smaller positions in some of its mid-cap picks.

Performance: The fund's one-year returns (62 per cent) as well as three year compounded returns (43 per cent pa) place it within the top quartile both within the diversified and thematic fund category.

Five-year compounded returns, at 39 per cent, are just a shade over the Sensex and place the fund in the second quartile within the equity return rankings.

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Tata Select Equity Fund: Analysis

Investors can retain their holdings in Tata Select Equity Fund based on its long-term track record. As the market is in the midst of a highly volatile phase, large-cap rather than mid-cap-based funds may be the more suitable option for conservative investors at this time.

Tata Select Equity predominantly invests in mid-cap and small stocks. It is basically a thematic fund but its portfolio appears similar to a diversified fund rather than a sector or theme fund.

The risk profile of this fund is relatively less in comparison to a pure sector or thematic funds but higher than that of pure diversified funds. The fund takes concentrated exposure to select sectors of its choice — in recent times, sectors such as capital goods, construction and ferrous metals. The fund is suitable for investors specifically looking to take aggressive exposure to a few sectors at a time.

Performance: Tata Select Equity's three- and five-year returns have comfortably outpaced the benchmark BSE Sensex. With the markets peaking out recently, due to high base effect, one-year returns on the major indices have fallen to low levels in comparison to the previous months. Tata Select Equity has managed to beat the benchmark marginally over the one-year period. But the fund's high allocations to mid-cap and small cap stocks should have resulted in better performance.

The fund does not appear to have participated in investment opportunities in sectors such as banking and consumer goods in this period. The fund has generated higher returns through SIP investments than with lumpsum investments.

If an investor opted for SIP he could have earned 91 per cent in the past one-year (till January). SIPs, since inception, would have generated a compounded annual return of 35 per cent. This is higher than returns generated by lump sum investment by twelve percentage points.

Portfolio overview: In spite of the fund taking concentrated exposure to sectors, it has well diversified holdings with a sizeable number of stocks. For a compact asset size, the fund has 53 stocks in the latest portfolio.

The fund prefers to adopt a buy and hold strategy, exceptional holdings being BHEL, Cummins, Elecon Engineering and Jaiprakash Associates.

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