Monday, October 08, 2007

Gem gaze

The gems in the sectoral space take turns exhibiting their lustre. Their fortunes are intertwined with that of their sector so much so that perennial prosperity is the priced possession of a select few funds. Listen with rapt attention to the stories…

DSPML TIGER …. the ferocious fauna!

DSPML TIGER's growth-oriented, largecap, well diversified portfolio has helped it deliver good returns. There is a sage behind the aggressive fa├žade that the name presents. An acronym for The Infrastructure Growth and Economic Reforms, the fund focuses on sectors that are likely to prosper from growth related to economic reforms and infrastructure development. Launched three years ago, the fund capitalised on the infrastructure run – a well-timed entry. Though telecom and power are the prime focus of the fund, its broader mandate enabled it to tap into sectors that core infrastructure funds do not - healthcare, FMCG, textiles. The portfolio is, probably, too well diversified at around 65 stocks. RIL, the largest holding, is currently at less than 6 per cent and the rest are all below 4 per cent. One can expect such diversification from a mid-cap fund, but this is surprising from a predominantly large-cap offering. Nevertheless, its tilt towards growth investing – GARP (Growth at a reasonable price) has enabled it to deliver superior returns.

Reliance Diversified Power Sector ….power-packed performance

The Fund is a classic case of being in the sweet spot at the right time. The pioneer and only fund in the power sector, Reliance Diversified Power has a proven track record, way ahead of its benchmark India Power Index. The Fund aims to exploit growth opportunities available in power sector in the country, driven by rising demand and scarcity of electricity in the country. India is facing electricity deficit of 9.3% and peak demand deficit of 13.9%. Besides, the government has launched an initiative to remove electricity deficit by 2012. This surely provides an upside for the companies engaged in power business.The fund adopts a blend of growth and value oriented buying strategy with a prime focus on mid-caps. The number of stocks held in the portfolio is fairly static at 18 with very little churn in the portfolio in view of the long term vision of the fund manager. The long and successful innings that the power sector promises is based on solid foundations and it is roses all the way for the fund…

Prudential ICICI Infrastructure…a stable star

ICICI Prudential Infrastructure has protected the downside well while growing at a fast pace. The fund exhibits discernible differences that set it apart from other infrastructure based funds. The fund's average exposure to basic and engineering stocks has been only 8.7 per cent as against an average of 20%! The fund is underweight on construction stocks relative to its peers. But its exposure to the banking sector is high. While essentially a growth-oriented fund, it has a substantial representation of value stocks. The fund has managed to strike an equilibrium between making contra bets and limiting its downside by maintaining smaller holdings. And this equilibrium has worked in the fund's favour, for it displays better resilience in a bear market relative to its counterparts. A relatively less volatile performance coupled with an optimally diversified portfolio, make the fund a good choice in the infrastructure space.

DSPML Technology ….the towering techie

DSPML Technology has performed well, delivering good returns with low volatility. The fund's buy-and-hold strategy has paid off well .When referring to sector funds, consistency is not what most people think of. But this fund aims at just that and has succeeded. It has consistently beaten the category average over the past five years. By being well diversified, restraining the number of mid-and small-cap stocks (44.35 per cent of its portfolio is in large-caps) and limiting exposure to single stocks, the fund has managed to deliver good returns at low volatility. In the past 36 months, the portfolio has had an average of 28 stocks. Allocation to individual stocks, barring Infosys which is currently at 16.48 per cent, is mostly restricted to a single digit (NIIT follows in the second place at 9.21 per cent). Its strategy has held it in good stead in the current turbulent market. In the past six months the fund’s assets under management have almost trebled! And this has come at a time when the IT sector is in a slump and its peers have been losing investors. This phenomenon should not come as a surprise since the fund has maintained a broader mandate of investing in media, entertainment, telecom and other technology enabled companies as possible investment avenues. The fund has managed to tide over this slump on the back of astute stock moves as well.

The moral of the stories is… ”Stick to the knitting“ does not pay off …the cushion offered by these funds have stood them in good stead.

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