In recent years, the bull-runs at the Indian bourses have generally been accompanied by a flurry of
24-Sep-2005 •Research Desk
In recent years, the bull-runs at the Indian bourses have generally been accompanied by a flurry of fund IPOs. As we have often said, it takes a few years' performance record to discover whether a fund is good, bad or average. In fact, among equity funds, Value Research rates only those funds which are at least three years old. To fill the gap, we have decided to scan the more recently launched funds to identify the ones which have delivered good returns.
Only those funds in the diversified equity category have been screened which were launched after March 2002, but before May 2004. This led us to the funds which are not yet rated by us. At the same time, they are at least one year old, and thus have been in existence for a reasonable period of time to facilitate comparison with peers. We zeroed down to 28 such funds.
From this list, we identified six funds which are ranked in the top quartile on the basis of one year trailing returns as on April 27, 2005. These include Birla Mid Cap, Kotak Global India, Sundaram Select Midcap, UTI Basic Industries, UTI India Advantage Equity Fund, and UTI Mid Cap.
Interestingly, the top three turn out to be mid-cap funds, while two invest in the companies which have the potential to grow globally. However, all three mid-cap funds have significantly different portfolios. As per the portfolios for the month of March 2005, the top three sectors for all the three funds were altogether different.
However, these funds are yet to pass through a bear phase to prove their mettle. Nevertheless, there is no denying that they are off to a good start.
Birla Mid Cap: While staying fairly concentrated in terms of sectoral allocation, this fund diversifies its risk at the stock level.
Kotak Global: Four sectors--health care, basic/engineering, technology and auto form the core of this sectorally concentrated offering. As on April 30, 2005 these four accounted for almost two-thirds of its portfolio.
Sundaram Select Midcap: Though this highly diversified fund has given good returns in the last one year, the excess cash component (31 per cent as on April 30, 2005) is a worry.
UTI Basic Industries: As the name suggests, this fund's top three sectors include energy, construction, and basic/engineering. The fund looks fairly diversified across stocks and sectors.
UTI India Advantage Equity Fund: An average exposure of 44.31 per cent to tech stocks in the last one year means that the fund's fortunes have moved with the sector. Health care is the other dominant sector in the fund's portfolio.
UTI Mid Cap: The fund has reduced its exposure to technology significantly in recent months to make room for sectors like construction and diversified, thus making the portfolio better diversified. Lately, the fund has been betting big upon Thermax.