Monday, September 12, 2011


September 2011

The market carnage has finally taken its toll. Only four GEMs of September 2010 have retained their esteemed status by virtue of their consistent performance. Magnum Contra, contrary to expectations, has exhibited a dismal performance and has been shown the door. Sundaram Midcap Fund has occupied its coveted position in the September 2011 GEMGAZE.

HDFC Equity Fund Gem

Steady star

With net assets of Rs 9220 crore, the one-year return of HDFC Equity has been -11.84% as against the category average of –13.61%. Finance, energy, and technology form the top three sectors accounting for nearly 50% of the net assets of the fund, replacing healthcare, which occupied the third slot last year. Nearly 80% of the portfolio comprises of large caps with the remaining in mid and small cap stocks, a significant change from 60% last year. With less than 20 stocks in the portfolio till 2003, the fund manager increased it to around 60 stocks last year. At present, there are only 34 stocks in the portfolio. The top 10 holdings have averaged at around 30% over the past one year. The large corpus has led to it being more diversified. The expense ratio of the fund is 1.79% and the portfolio turnover ratio is 37.37%.

HDFC Equity is benchmarked against S&P CNX-500 — an index often considered tough to replicate or beat. The fund though, has beaten this index 78 per cent of the times on a rolling return basis in the last three years. Though the fund is oft perceived to be risky, given its short-term swings and concentrated sectoral bets, its returns on a risk-adjusted basis are impressive. An enviable track record of 16 years, during which the fund clocked a compounded annual return of 24%, multi-cap approach and the strategy of staying invested in equities across market cycles make HDFC Equity an ideal candidate for long-term investors.

Sundaram Midcap Fund Gem

Quality with Integrity

Sundaram Midcap Fund sports net assets of Rs 2191 crores. The one-year return of the fund is –9.72% as against the category average of –14.02%. Its three-year and five-year returns are 16.43% and 13.08% as against the category average of 10.61% and 8.74% respectively. The fund has recorded a compounded annual return of 35.9% since launch in July 2002, outpacing the BSE Mid Cap Index by 11.5 percentage points on an annual basis. Sundaram Select Mid Cap is a dedicated mid-cap fund. This style integrity, which has been maintained since launch in 2002, and the track record places the fund as an appropriate vehicle for defined asset allocation decision by investors. 35% of the assets are invested in sectors such as services, chemicals and engineering. The top ten stocks in the portfolio account for 42% of the assets. The fund’s massive diversification with 52 stocks dilutes risk to an extent. The expense ratio of the fund is 1.89% and the portfolio turnover ratio is 69%.

Sundaram Select Midcap has a strong track record of beating its benchmark, the BSE Midcap, in 4 out of the last 5 years, in 5 out of the last 6 quarters and in 5 out of the last 6 months. The fund focuses on valuations with emphasis on portfolio quality and profit booking.

ICICI Prudential Dynamic Fund Gem

All season play

With net assets of Rs 3814 crore, the one-year return of ICICI Prudential Dynamic Fund is –7.27% as against the category average of –11.23%. The fund's portfolio is well-diversified and represented by 85 stocks as against 37 last year. The top ten stocks accounted for close to 47% of the assets invested in equity. The top three preferred sectors were energy, banking, and software. The fund often prunes its holding in individual stocks when its objects are met. This is evident from its high portfolio turnover of 117%. The expense ratio is 1.82%.

lCICI Prudential Dynamic Fund provides an ideal choice to make the most of dynamic changes in a volatile market. It has the ability to capture upside opportunities across value and growth, large and mid-cap, index and non-index stocks. On the flip side, it also has ability to move into cash as markets get overvalued. This approach helps mitigate risks during a downside and also provides more stable return opportunity during the market rallies. ICICI Prudential Dynamic Fund has the flexibility to shift stances between “Attack” and “Defense” to ensure that you benefit from the market changes by investing across sectors, styles and capitalizations. ICICI Prudential Dynamic Fund thus an excellent option for investment in any market condition.

DSP BlackRock Equity Fund Gem

Consistent outperformer

DSP BlackRock Equity Fund, a diversified equity fund with assets under management of Rs 2516 crore, is among the few consistent performers. Its one-year return was –11.14% as against the category average of 13.61%. The top three sectors, finance, energy, and health care, constituted 37% of the portfolio. Exposure to the top 10 stocks is currently at 36%. From over 67 stocks a year ago, the number of stocks is 78 at present. The expense ratio of the fund is 1.86% and the portfolio turnover ratio is very high at 185%.

The long-term track record of delivering superior returns in addition to its ability to contain downsides well makes DSPBR Equity Fund a good investment option in this market. The fund offers exposure to stocks across market capitalisation categories and has beaten its benchmark CNX Nifty over one, three and five-year periods. DSPBR Equity has delivered a compounded return of about 12% and 28% over three- and five-year periods. Besides outperforming its benchmark over these periods, it also outperformed the bellwether on an annual basis in each of the last five years. It has also outperformed the CNX Midcap over three and five-year periods, helped by its multi-cap approach. However, a highly diversified portfolio in terms of both market capitalisation as well as number of stocks held, somewhat pegs up its risk profile over its large-cap benchmark.

Birla Sunlife Frontline Equity Fund Gem

Frontline performer

Birla Sunlife Frontline Equity Fund has net assets of Rs 2909 crore. Its one-year return is –10.4% as against the category average of 11.23%. But its three-year and five-year returns of 11.47% and 13.35% surpass the category average of 7.76% and 8.37% respectively. More than three-fourth of its portfolio is invested in large cap stocks. The top three sectors of finance, energy, and technology constitute 46% of the portfolio. The fund has 57 stocks in the portfolio. High returns, low risk and a diversified portfolio are the hallmarks of the fund. The expense ratio of the fund is 1.86% and the portfolio turnover ratio is 44%.

The fund is quite aptly named - BSL Frontline Equity Fund has been a frontline performer through good and bad markets - outpacing its benchmark each year over the last 5 years and almost every quarter over the medium term. As a testimony of its consistent performance, 83% of times, the fund has beaten the benchmark (BSE 200) in 1 year rolling returns. Birla Sun Life Frontline Equity Fund’s performance is attributable to dynamic sectoral allocation in the portfolio, stock selection and timely market calls. The scheme is managed using 3 key principles – discipline, bottom-up stock picking and profit booking at opportune moments.

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