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Hitting The Target

Zurich India Equity's goal is to provide long-term capital appreciation. However, this fund which was an appealing bet should be looked at with caution now that it has acquired size, which will hampers its portfolio churning.

This fund claims that it takes large exposure in select stocks that are the 'best investment ideas' and backs it with marginal exposure in small/mid-cap stocks, with strong upside and low downside potential. This fund so far has managed to strike a balance despite a bloated asset base and its occasional adventurous indulgence.

Zurich India Equity which always was a formidable player now has investors vouching for it in huge numbers, with its corpus looking a healthy Rs 198 crore from Rs 73 crore in February. This sudden growth could have negative implications, hampering its maneuverability.

The fund's growth-oriented holdings fuelled good gains despite a tough market this year. The result: its YTD return is 23.22% against the category's 18.08%, as on July 12, 2002. Historically, its performance swing has been less than the average peer's and it has always been among category toppers. Its 5-year and 3-year return of 25.54% and 16.15%, respectively, beats the benchmark Sensex.

Launched as a closed-end fund in December 1994 when the IPO boom was almost over, it caused shareholders a lot of heartburn initially. In 1998, it re-invented itself, with new strategy in place, the fund turned in handsome dividends. Being conservative by choice it stuck to prudent diversification even during the tech frenzy and it was a laggard in a roaring market.

Believing in buy and hold, this fund is always looking for special opportunities to strike gold. Case in point: energy stocks, which should fetch it good gains from measures like divestment and the oil price hike.

That this fund has an adventurous spirit is evident from its bets on undervalued small/mid-cap stocks. For instance, it picked up heavy stakes (over 10% currently) in companies like Fortune Informatics, Polaris and Digital Globalsoft, hoping that once markets undergo a correction these companies will get attractive valuations.

In booming markets, this fund might not be top of the tops but in a tough market, this fund has shown the capability to outperform its peers.

Overall, this less volatile fund is tempting from a risk as well as returns perspective. As a long-term holding, it is dependable.