The Bombay Stock Exchange (BSE) sensitive index Sensex has risen by almost 85 per cent since its low in early March this year, but the new fund offer (NFO) from Sahara Mutual Fund, Sahara Star Value, seeks to generate returns by investing in undervalued companies.
The fund house is figuring that sudden market pessimism towards a stock at times causes heavy selling while its earnings and fundamentals are ignored. Such stocks potentially generate above average returns over time as the market will sooner or later catch up with the stocks real value.
The fund manager will try to identify such value stocks based on their price to equity (PE) ratio, price to book value (PB) ratio, enterprise value to EBITDA (EV / EBITDA) ratio, et al.
The designated fund manager for the scheme is A. N. Sridhar, Master in Financial Management from NMIMS, Mumbai. He has earlier worked with the Central Bank of India (1985–1989) and Unit Trust of India (1989–2003) along with other brokerage houses.
He is also the fund manager for 10 other schemes of the fund house.
Sahara Mutual Fund started in July 1996 and has 9 equity schemes as of now. In July 2009, it had Rs 207 crore of assets under management, of which the equity schemes accounted for about 27 per cent. Its one equity scheme is rated as 5-star by Value Research, two as 4-star, one as 3-star while the rest are unrated.
Although some of the fund house’s schemes have been good performers in the past, they have failed to find favour with investors and all currently manage assets under Rs 10 crore each.
Type: Open-Ended Equity Fund
NFO Opens: July 30, 2009
NFO Closes: August 28, 2009
Plan / Options: Growth and Dividend (reinvestment and payout) options.
Minimum Application Amount: Rs 5,000/-
SIP Investment: Available on monthly (min. Rs 1,000 x 5) and quarterly (min. Rs 2,000 x 3) basis.
Benchmark: BSE 200
Load Structure (During NFO):
Entry Load: 2.25 per cent
Exit Load: For investments of less than Rs 5 lakh, Nil; For investments of Rs 5 lakh or more, 1 per cent for redemptions within 1 year.
Annual Recurring Expense (maximum): 2.50 per cent (including Investment Management fee of 1.25 per cent).