An Open Ended Equity Growth Fund

Fund Manager: S Krishnakumar

Date of Allotment: February, 2005

The scheme aims at capital appreciation by investing in diversified stocks in the small and mid caps space. Resultantly, its risk profile increases when compared to a diversified scheme focusing on front line stocks.

Portfolio Analysis

Though the focus of the fund is biased towards mid and small-cap stocks, its mandate also allows it to hold up to 35 per cent in the stocks from the large cap category. This has helped the fund to not only trim down volatility but also provide enough liquidity during market downturns.This is also reflected in the funds’ performance during the recent downturn as it managed to outperform most of its peers with similar objectives.

As per the factsheet of October 2009, the funds equity exposure stood at over 95 per cent with significant allocation to sugar stocks. The fund seems to have having taken exposures well ahead of the rally in this sector which indicates the ability to identify the trend in advance.

The scheme has highest exposure in the stocks from consumer goods space which basically comprises sugar stocks, followed by Financial and Services, Metals and Auto sector. Notably the top three sector holdings comprises almost 43 per cent of the portfolio.

The fund has also exited completely from the IT sector which aggregated over 10 per cent of the assets just a month ago. It has also reduced its exposure in  the Energy sector stocks from over 13 per cent to less than 8 per cent  and reduced its cash levels by almost 50 percent to 3.3 per cent as compared to over 6 per cent during September 2009.

Over time, the fund has done well to gradually reduce the number of stocks in its portfolio from over 95 stocks to little over 65 stocks. Notably the funds exposure to any single stock does not exceed more than 5 per cent of the total assets.

Investment Strategy Analysis

With ample diversification amongst sectors as well as stocks, the funds performance has been above average. The higher Sharpe ratio of the scheme at 0.93 indicates better risk adjusted performance of the fund.

Risk Profile :

Standard Deviation: 23.57
Beta: 1
Sharpe Ratio: 0.93

Outlook :  Those looking for investments in small and mid-cap stocks even while minimizing volatility related risks can consider taking a small exposure.

Caveats : Higher risk in terms of high portfolio beta and exposure to mid cap stocks.