VR Logo

Chart Topper

The fund has performed well over 3-month, 6-month and 1-year period. For the week ended June 1, 2007, JM Basic was the best performer in the entire diversified equity fund category

Upfront, let's be honest. We are not analysing this fund, just making an observation. For the week ended June 1, 2007, JM Basic was the best performer in the entire diversified equity fund category. And, it reigned supreme across five time periods (1-week, 1-month, 3-months, 6-months, 1-year).

Normally, we are wary of short-term spurts. And there are grounds for our skepticism. Funds that suddenly appear in the top performance radar can be relegated out of sight just as fast. That said, we recognise that not all such cases should be dismissed outright. In this case, the fund's climb up the ladder may be more than a stroke of luck. It could be the direct consequence of the moves adopted by the new fund manager.

Sandip Sabharwal took over as the CIO (Equity) in December 2006 with a drive to produce extraordinary results in the shortest time frame possible. J M Mutual Fund, as a fund house, is not a brand well received by investors across the country and only fund performance can change perceptions. So it hardly comes as a surprise that his change in strategy - focused diversification with a growth bias - was swift and far from subtle.

When Sabharwal (and fund manager Bhandarkar) inherited the JM Basic portfolio, it was a very concentrated offering with a large-cap bias. Being a growth investor at heart, Sabharwal smelt opportunity in the mid-cap space. Since this fund has no market-cap bias, large-caps like Bharat Electronics, Siemens and Suzlon made way for mid- and small- caps like Bharti Shipyard, Cummins India, Greaves Cotton, Indotech Transformers, Kalpataru Power Transmission, MIC Electronics, Thermax and Apar Industries.

To alleviate the problem of the portfolio being dominated by few sectors and stocks, he broadened the investment mandate. So besides energy, power generation and distribution, petrochemicals and oil and gas, it now includes metals, construction material and construction. Mid-caps like Hindustan Construction, IVRCL Infrastructures & Projects, Nagarjuna Construction, Action Construction Equipment and Punj Lloyd all came in under the fresh mandate.

Having done that, he managed to beef up the portfolio from a meager 12 stocks (November 2006) to the now 21 (May 2007). Being a firm believer of investing with conviction and riding ones calls, he should maintain his portfolio at around 25 stocks distributed across seven sectors. Excessive diversification is not his style.

Despite the enlarged fund objective and fresh perspective, this fund is a risky proposition simply because it is limited to certain sectors - banking, pharmaceuticals or technology will never find a place here. The moment you limit your fund to a few sectors, it becomes more risky than a diversified equity fund. Consider it if you have a moderate to high risk appetite.