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On Comeback Trail

It's a new entrant in the Value 50 list. Having digested the market gyrations with much ease in the recent times, we think Principal Growth is a solid offering to put one's money for the long-term

With a judicious mix of large- and mid-cap stocks, Principal Growth Fund, under new fund manager Shyam Bhat, has made a smart comeback this year.

After being in the bottom half of the category through 2003, the fund has gained 26.8 per cent in 2004 (till November 25, 2004), thus ranking among the top 10 per cent funds in the diversified equity funds' category.

This exceptional performance has not only been confined to the recent rally in the stock markets. It has also done well in protecting returns through the initial dull phase of 2004.

Hence, Principal Growth has shown its mettle both in bad as well as good times making it a worthwhile option for investors.

Much of Principal Growth's good performance can be attributed to smart sector bets. During early 2004, when the going was tough for equity funds, the fund raised its exposure to automobiles and construction, which provided a cushion.

And as the rally in equity markets took off after June 2004, the fund benefited from higher allocation to tech, auto and energy stocks. Infosys has been one of its top-10 holdings, which has been very rewarding in the current rally-the stock is up over 70 per cent in past six months. TCS is among its top holdings too.

Though the fund has most of its exposure in large-caps, it has also been fortunate with its mid-cap holdings. Mid-caps like IVRCL Infrastructure, Pantaloon and Blue Dart helped the fund earn good returns.

And since the fund's portfolio is widely diversified across 35-45 stocks with no single sector accounting for over 15 per cent allocation, we can expect a lower downside risk here. Principal Growth is also one of the least volatile funds in the category with a standard deviation of 6.17 against the category average of nearly 7.

Overall, Principal Growth is a good diversified equity fund having investments in all market capitalisation ranges that exist today.

Having digested the market gyrations with much ease in the recent times, we think Principal Growth is a solid offering to put one's money for long-term.