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Opportunism Pays

Investors looking to benefit from sectoral bets will appreciate this fund. However, as the last year's rally was broad-based, it has donned a well-diversified look thus delivering returns with much lower risk

Opportunist by name and diversified by its actions, this fund has emerged in the category's top ranks. DSPML Opportunities Fund has got returns with lower risk than what its charter allows. Even though it is allowed to take concentrated bets in two or more sectors like lifestyle, pharma, cyclical or technology, the fund has followed a more diversified path so far.

Launched in mid-2000, DSPML Opportunities had 50 per cent of its portfolio parked in IT stocks initially, but its exposure to non-IT stocks such as ITC and Nestle helped it beat the benchmark when techs crashed. In 2001, the fund fumbled till the market hit a bottom after 9/11. When the markets rallied later that year, it beat both the category and the benchmark due to its PSU holdings. The fund's IT holdings like Mphasis BFL also had a role to play. In spite of these gains, the earlier losses resulted in the fund underperforming its benchmark and moving into the third quartile of returns.

The outperformance continued in the first half of 2002 as it beat its benchmark by 17 per cent in the first four months. As markets moved up in late 2002, an increased allocation to mid-cap stocks helped the fund turn in decent returns. It also raised its allocation to auto, FMCG and financial services sectors. With this winning performance across different cycles of 2002, it was in the top quartile.

The outstanding performance was repeated in the year 2003 too. An underweight position in IT before Infosys tanked and winning stocks such as ITC, Ranbaxy, Grasim and L&T helped. An overweight position in bank, auto and pharma stocks also boosted its returns. On the whole, its performance during the 2003 rally can be attributed to a diversified portfolio. In April 2004, an overweight position in construction helped the fund outperform the benchmark by 5.5 per cent as prime holdings Gujarat Ambuja Cement and ACC logged handsome gains.

DSPML Opportunities resembles a diversified equity fund and this diversification is a conscious decision as the rally in the market has been broad-based. The fund, however, will move into specific sectors once it expects significant price appreciation.