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Magnum FMCG

Magnum FMCG is a sectoral fund dedicated to investments in the FMCG sector. Entry in to the fund car

Magnum FMCG is a sectoral fund dedicated to investments in the FMCG sector. Entry in to the fund carries a load of 1.5 per cent while exit is at NAV. Since its launch in July 1999, the fund has not paid any dividend.

Launched under the umbrella of Magnum Sector series, the fund focuses on companies, which cater to our day to day consumption needs. With a growing population and expenditure levels, these companies have a huge market potential. Typically FMCG stocks include companies that are into personal care, household care, food products, cigarettes etc. Also, given the perennial demand for their products, these companies are likely to offer steady growth rates and are defensive in nature. Within this predefined investment universe, the fund follows a core philosophy of investing in companies that are showing high growth rates in terms of sales and profits but it is not fully represented in terms of prices. The fund started off with a concentrated portfolio, which had a fair representation from domestic FMCG stocks. The fund's holdings are largely in mid cap growth stocks, such as Mirza Tanners and Pidilite Industries. The fund also has some off beat holdings such as Vikas WSP and Padmini Polymers.

With this portfolio, the fund started on an impressive note, with its launch coinciding with the brief rally in the FMCG counters, it gained 40% in less than a year's time. However, with the ICE stocks singularly dominating the rally towards the end of 1999 and early 2000, the gains peaked in January 2000. However, with the broad market crash headed by the ICE stocks, the fund lost heavily and the NAV slipped below par levels. While the fund has posted a return of (-) 16.22 % since launch, the Sensex has shed about 3.05% over the same period. Also, the fund has been more volatile than its two peers, largely due to its holdings in B group stocks.

Sectoral funds with their specific focus are more volatile than their diversified counterparts. With the FMCG sector in particular being out of market favour, investors need to really think long term if they want to benefit from sectoral bets.