This fund has an attractive long-term record from a growth-led portfolio of small and mid-caps, but that also makes it a risky and a highly volatile. But this tack has helped the fund turn in strong returns over the long-term. Its trailing 3- and 5-year returns 11.52% and 19.29%, respectively – which rank in the category's top decile – prove that beyond doubt.
In its long haul of over eight years, the fund is currently on its third big leap. First, launched just before the IPO boom in 1994, its NAV doubled within one year. However, the fund's excessive diversification -- comprising 250 stocks -- turned sour. Consequently, its asset base dipped from Rs 314 crore in March 1995 to Rs 15 crore by February 1998. Second, during the tech boom, despite holding just two tech stocks -- Crest Communications and Mastek - the fund got a big lift from its other mid-cap holdings. And, finally, the fund has benefited from the recent rally in mid-cap stocks like Indo-Gulf, ABB and IBP post- September 2001. With that last quarter jump of 34%, it finished 2001 at the top and is up 33.93% year-to-date.
While maintaining a well-diversified portfolio, it has constantly churned its portfolio in search of potentially viable mid-cap growth stocks irrespective of sector bets. That's why despite being an aggressive fund it never went overboard on any sector. Even during the tech rally, it had a maximum tech allocation of 23%. The fund doesn't hesitate from selling off a stock when it thinks its long-term prospects have dimmed. Case in point: Wartsila India, a mid-cap engineering stock, whose price has dipped by half in the last two years. Currently, the fund is bullish on I-Flex – the fund's topmost holding. Recently, the company reported a better Q-1 result, which could act as a booster. The fund's sizable weightage to banking (13.77%) and pharma (7.9%) stocks is also justified as these sectors have generally fared well thus far in 2002.
The ability to make the most of a given situation -- by sticking to its mandate -- has certainly made this fund a rewarding long-term investment. However, it's only meant for those who can stomach its intermittent volatility.
This article was originally published on August 12, 2002.
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