Zurich India Equity, has been a case of well-engineered turnaround. Focussing on a few quality stocks, the fund has resurrected itself to offer a blue-chip portfolio with steady returns.
For the fund had hit a low of Rs 5.15 in 1996 amid the floundering IPO rally before revamping its portfolio. Starting from scratch in 1997, the fund sought to build a portfolio of companies with proven management, strong market position and high liquidity. With this bottom up stock picking strategy, the fund has taken bets at select counters, with the top 5 stocks accounting for an average 45 % of the asset base.
However, investment in select stocks is without any compromise on diversification. While pitching the portfolio in favour of the growth sectors of software, pharma and FMCG, the fund also has exposure to cyclical stocks. For instance, even at the peak of the ICE rally, the stake in the technology sector was at 40 % just a few notches above the broad market indicator.
A diversified collection backed by active management has seen the fund chart an impressive turnaround in the bull markets of 1999. While the fund was still a relative under-performer in its category during the boom, it has strongly held ground in a falling market. The devotion to diversification has seen the fund weather the rough and tumble market of 2000 - it lost 20 % in line with the index.
While the return since launch are a paltry 7.84 per cent, its past is best left discounted. Aided by a small corpus, the fund has resurrected itself to offer a blue-chip portfolio and 32% in the last three years. Despite its select bets, the stable returns position the fund in an attractive risk-reward bracket. With nil load under SIP, systematic investors would stand to benefit.