Don't Write This One Off | Value Research Sundaram BNP Paribas Select Midcap had been subdued lately, but shouldn’t be shunned as yet
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Don't Write This One Off

Sundaram BNP Paribas Select Midcap had been subdued lately, but shouldn’t be shunned as yet

Looking at its history, three aspects stand out: a bloated portfolio, high cash allocations and phenomenal returns.

While the fund has consistently beaten the annual category average, its return at times has been mind boggling. Consider its return of 157.73 per cent in 2003 (category average: 111.37%) or 60.77 per cent in 2006 (category average: 34.72%). Unfortunately, last year’s performance was a letdown. The reason could well be its sector exposure.

Though it began reducing its allocation to technology from September 2007, it had a 9.35 per cent average allocation to it over the year. Auto had a lower allocation of 4.26 per cent. The BSE IT shed 14 per cent last year while BSE Auto returned just 3 per cent. It missed out on the rally in energy stocks with the BSE Oil & Gas and Power indices delivering 115 per cent and 122 per cent, respectively, in 2007. The allocation to financial services and basic-engineering too was not that high though the BSE Bankex delivered 61 per cent and BSE CG, 117 per cent in 2007.

The lack of continuity in terms of fund managers has resulted in a fair amount of churning as each would obviously want to ride his own bets. Each fund manager brings in his own investment style. So in 2006 (May-October), the fund played it safe by averaging a 32.40 per cent cash allocation, an average of 106 stocks, though it touched 126 at one time, and an 11.42 per cent allocation to large caps. But 2007 saw a lower cash holding (average of 10.37 per cent), lower large-cap allocation (10.37 per cent), and lower number of stocks (98) which has now touched 64 (July 2008). Its favourite picks over time have been Sundaram-Clayton, Thermax, Maharashtra Seamless, Kirloskar Oil Engines and Madras Cement, which have delivered handsomely.

Its returns coupled with its ability to protect the downside still make it a good bet. In the bear phase this year (January 8 - July 15), it fell less than the benchmark but slightly more than the category average. But it’s obvious that the exit of Anoop Bhaskar in mid-March 2007 has hit the fund. In the bull phase (June 15, 2006 - January 8, 2008), the fund underperformed the category average and the BSE Mid Cap. In 2007, it underperformed the index and was just marginally ahead of the category average.

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