Containing volatility

FUND PICK/ SUNDARAM GROWTH FUND

Sundaram Growth Fund was launched in March 1997. The fund has an entry load of 2 per cent for investments upto Rs 2 crore.

Performance: The scheme aims to provide investors reasonable returns from a well diversified portfolio of stocks over the medium-to-long term.

It will also not pass a short-term opportunity in case it can make above-average returns. It also invests a portion of its assets in relatively liquid large-cap stocks.

The fund's performance has been consistently better than its category average over all timeframes. For example, its five-year return is at 25.91 per cent compared to the category average of 23.18 per cent as on April 23, 2004.

Its one-year return is at 136.67 per cent compared to 133.13 per cent of the category.

Portfolio: The fund has low volatility along with a consistent performance. The benefit of the scheme is its ability to control losses in bear markets.

It is a highly diversified fund. It does not take more than 5 per cent in a single stock.

The result of this diversification is that Sundaram Growth rarely beats its benchmark during bull phases or tops the category, but it has rarely fallen below the benchmark or its category peers in bear markets.

During the bear spell of December 2002 to April 2003, an average equity fund was down 6.08 per cent and the BSE 200 lost 11 per cent. In comparison, the fund held its ground and lost just 3.11 per cent. However, in the subsequent bull market, the fund could find a place in the third quartile only.

Besides capping individual positions, the fund does not tend to skew its sectoral spread. Starting with the bull run of 1999-2000, it did participate in the growth-led rally of technology, FMCG and pharma stocks.

But prudent diversification, low to medium exposure in momentum stocks and timely exit saved the fund when a lot of equity funds suffered steep losses.

Since then, the fund has cautiously kept technology exposure below 20 per cent. Old economy and cyclical stocks have helped it survive the bear spell during 2001.

Though it missed out the early 2001 rally in energy-driven PSU stocks, the fund participated in the next round during the run-up to Budget 2002. But with the divestment prospects of PSUs hanging in the air, the allocation to the sector has come down in recent months.

The fund also participated actively in the PSU banks-driven rally in early 2003, but the exposure has come down in recent times. FMCG and healthcare are two other sectors where the fund has reduced its exposure substantially.

 

Top holdings
As On March 31, 2004	Value (Cr)	Net Assets (%)
Maruti Udyog	4.75	4.19
Tata Motors	4.72	4.16
Indian Oil	4.71	4.15
SBI	4.68	4.12
Mahindra & Mahindra	4.57	4.02
ACC	4.51	3.97
Hero Honda Motors	4.50	3.97
Reliance Industries	4.42	3.90
Larsen & Toubro	4.38	3.86
National Aluminium	4.36	3.84
Grasim Industries	4.36	3.84
Gujarat Ambuja Cements	4.33	3.82
ITC	4.26	3.75
Tisco	4.14	3.65
Punjab National Bank	3.83	3.38
Kochi Refineries	3.57	3.15
Bhel	3.50	3.08
Siemens	3.25	2.86
Wipro	3.13	2.76
Oil & Natural Gas Corp	2.70	2.38

Outlook: Sundaram Growth comes with low volatility. The fund protects its downside better than the upside. Its consistent performance makes it the perfect supplement in an aggressive equity portfolio.