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Confused Identity

Tata Life Sciences & Technology is a dual-sector fund but has nothing of significance to write home about

With such a mandate, it is difficult to compare this fund's performance with any diversified equity fund. Neither is it a pure tech play nor a pharmaceutical one, so a sector comparison too is not possible. But what's good about this two-sector approach is that if one sector slumps, the other one is there to balance it, unlike a pure sector fund. Take the December 2007 quarter for instance. BSE IT fell by 2.12 per cent. But this fund delivered a return of almost 15 per cent, thanks to the healthcare sector. The same took place in June 2007. But on the flip side, if one sector rallies, the other one is likely to dent the returns. In March 2006, BSE Healthcare delivered almost 24 per cent, but this fund came up with 19.73 per cent. The reason: IT stocks lagged behind with the BSE IT delivering just 7.68 per cent. If one compares this fund with the Sensex, its benchmark, it has underperformed in the last four quarters. Despite a focus on the technology and life sciences sectors, the fund has deviated from its calling. Stocks like Bharat Electronics, BEML, BHEL, Siemens, Provogue (India), National Aluminium Co., Britannia Industries and Zee Entertainment have all made an appearance in this portfolio.

This fund has been around for quite a while but has never really attracted investors. It's net assets touched a high last year of Rs 64.25 crore (July 2007) but is current very small at just Rs 42 crore. With such a tiny corpus, one would expect focussed bets. And that used to be the case. In its earlier days, the fund was a very concentrated one with the number of scrips being just 10 at some points in time. For example, way back in June 2000, the fund held just 15 stocks with the top five stocks accounting for 68.57 per cent of the portfolio, with Visualsoft Technologies at 22.28 per cent. No longer is that the case. The fund now manages a fair amount of diversification. Though the number of scrips has touched a maximum of 34 at times, over the past year it has averaged at 28.

What's interesting about this fund is the leeway to go 100 per cent into cash. Though it has never exercised this option, in the year 2000 it held on to huge amounts in cash, with the highest being almost 54 per cent (March 2001).

Investors would do well to stay away from such a fund unless they were totally bullish on both of these sectors. Even so, check if the current funds you are invested in already have a substantial exposure to such stocks. If yes, bypass this one.