CANARA ROBECO EQUITY DIVERSIFIED
This is a turnaround story. Launched in September 2003, it was only in 2007 that the fund began to give its peers serious competition. Till 2006, it resembled a mid cap fund, with the allocation to large cap stocks rarely exceeding 50 per cent, at times going to as low as 10 per cent. Also, the portfolio tended to be rather erratic. In certain months, there would be just 15 stocks in the portfolio and the number would jump to 55 the very next month, to drop to 41 within three months. This resulted in the fund being hit harder in market downturns.
However, since 2007, it has evolved into a stable offering, beating its peers. The large cap exposure began to get seriously high (peaking at 77 per cent in 2008) and the portfolio began to be consistently diversified. “This fund is predominantly a large cap fund, but we do not ignore mid caps. What we tend to do is pick up emerging leaders within sub-sectors. For instance, within the broad sectors of IT or pharma, we pick up mid caps which are leaders within the sub-theme,”says Nimesh Chandan, who took over the fund in July 2008. This played out well in 2009, when certain mid caps in the IT outsourcing space helped generate great returns.
Though individual stock holdings have not exceeded seven per cent since 2007 (barring RIL and Bharti Airtel), and allocation to the top five stocks has rarely crossed 30 per cent, the fund manager does not shirk from strong sector bets.
TATA PURE EQUITY
This is a long-run outperformer. Its five-year annualised return of 22.8 per cent (May 31) puts it ahead of most peers and the benchmark. During the 11 years of its existence, it's natural that in a few years it would underperform the category average and in some, deliver outstanding performances. By and large, it beats the category average by a small margin.
Last year, the fund could not manage an outperformance and delivered 77 per cent. Though M Venugopal tilts towards large caps, historically that has not been the case. In 2009, the fund began to bet on smaller fare and exposure to large caps is now at around half the portfolio.
Venugopal moves between sectors fluidly. Between December 2008 and May 2009, exposure to financial services dropped from 19 per cent to 6.8 per cent, to rise again to 15 per cent. The exposure dropped early 2009, when the sector took a beating. Once the market picked up, Venugopal added HDFC, India Infoline and ICICI Bank to the portfolio. "On a fundamental basis, we are positive on the financial space, given the demographic profile and savings rate in the country and under-penetration across the sector. The sector offers a number of quality stocks where, depending on valuations, one could buy or sell at any given time," he says. Venugopal is a great believer in diversification. No stock, barring RIL and ONGC, grabs more than seven per cent of the portfolio. From less than 30 stocks, he holds around 48, peaking at 60 in April 2005.
TEMPLETON INDIA GROWTH
In 2009, the fund's return of 104 per cent led it to beat the category average by a margin of 24 per cent! This is typical of the fund. In its 13-year history, it has displayed sporadic bouts of brilliance. But more often than not, it has been content with reasonable gains coupled with downside protection.
The fund is mandated to pick stocks that are selling at a steep discount to their five-year potential. This leads to the fund manager picking stocks that are probably shunned by others. In 2008, despite metals being among the worst-hit sectors, the fund manager held on to his position. In fact, he bought more shares of Sesa Goa, SAIL and Tata Steel. In 2009, when the market rallied, he offloaded part of these holdings. Similar moves were seen in 2007, when tech stocks were reeling under the pressure of rupee appreciation. The fund manager held on to its allocation in Satyam Computers and between August and October 2007, bought Infosys Technologies, MindTree and TCS. When markets soared from 2009 onwards, he reduced holdings in those stocks.
The fund manager maintains a concentrated portfolio of around 28 stocks, peaking at 38. The top five holdings account for around 35 per cent of the portfolio. Though he plays across market capitalisations and does not hesitate in buying lower cap stocks, he maintains a large cap bent. The buy-and-hold strategy is evident in stock and sector bets; energy and financials have been its all-time favourites and the top sectors since 2005. With a value-based investment approach, the fund is for long-term investors ready to hang on even when it does not rally with the market. Over the five-year period (as of May 31), its annualised return of 24.5 per cent was a tad above the Sensex at 20.3 per cent.
