Maintaining quality

FUND PICK: DSPML Savings Plus Moderate

The fund takes calculated risks to reward investors.

The fund was launched in February 2003. It charges no entry load but there is an exit load of 0.6 per cent to 0.1 per cent, depending on the duration and amount of redemption. The fund calls for a minimum investment of Rs 10,000; subsequent investments could be made in multiples of Rs 1,000.

With an 11 per cent return and a lower-than-average standard deviation, the fund has established itself as a quality MIP in two years. Except for the latest quarter, it has always outperformed the category average. This is commendable, given the turmoil in the bond markets in late 2003 and 2004. Last year, its 7.34 per cent returns pushed it up to the top quartile of the category.

The prime reason for the fund's performance is that it has used its mandate of investing up to 20 per cent in equities - higher than most of its peers - to reap the current stock market boom. Its equity exposure has rarely fallen below 10 per cent and has sometimes crossed 18 per cent. Despite its love for equities, the fund maintains a fair distance from relatively riskier mid- and small-cap stocks.

While small-caps are yet to find a place in the fund's portfolio, exposure to mid-caps has remained low. Large-caps like SBI, Ranbaxy Labs, ONGC and Grasim Industries dominated the equity portfolio and helped the fund keep volatility under check.

On the debt side, the emphasis is on quality with stress on either AAA papers or gilts. For example, the fund started off with a gilt-heavy portfolio and continued it till April 2004. Since then, AAA papers have taken over. In fact, since September 2004, gilts have formed an average 4.44 per cent of the portfolio.

The fund does not bet high on interest rates. It maintains its average maturity below the category average. For example, since May 2004, the fund has kept its average maturity below one year (0.24 years as on February 28, 2005) against 1.72 years for the category.

Though the fund's preference for safety is obvious in its equity as well as debt portfolios, it does not hesitate to bet occasionally on below-AA papers to squeeze in some extra returns - as on February 28, 2005, exposure to them was as much as 17 per cent, an all-time high since July 2003. 
 

Top holdings
As on April 30, 2005	Value (Cr)	Net Assets (%)
HDFC 2007	50.31	16.08
IDBI 2009	46.50	14.86
Sundaram Housing Finance 2007	20.00	6.39
Citicorp Finance 2007	15.23	4.87
Citifinancial Consumer Finance 2007	15.00	4.79
GoI 2016	14.85	4.75
Sundaram Finance 2007	10.00	3.20
Siemens	4.58	1.46
National Thermal Power Corp.	4.04	1.29
GoI 2005 6.18%	3.99	1.27
Oil & Natural Gas Corp	3.60	1.15
Glaxosmithkline Pharma	3.48	1.11
Hindustan Petroleum Corp	3.38	1.08
Tata Consultancy Services	3.29	1.05
Infosys Technologies	2.91	0.93
Grasim Industries	2.76	0.88
Gujarat Ambuja Cements	2.74	0.88

While quality is the fund's watchword, it takes calculated risks and rewards investors. The fund is relatively new but it deserves a look.

-Value Research

Returns in % as on June 2, 2005

FMCG funds were the top performers in the equity category, posting a 12-month return of 65.80 per cent. They were closely followed by tax-planning funds and diversified funds. 

Equity funds Average category returns (%)
	1 month	1 year
FMCG	9.09	65.80
Tax Planning	8.65	63.26
Diversified	7.22	53.00
Auto	11.02	49.38
Banking	6.59	46.41
Technology	11.00	46.16
Index	7.64	35.16
Pharma	11.16	33.98
Petroleum	4.32	28.93

Diversified funds continued to outperform their benchmark indices - the Sensex and the Nifty. 

Leaders Diversified funds
	1 month	1 year
SBI Magnum Global Fund	9.29	113.77
SBI Magnum - Contra	8.63	93.98
Reliance Growth	8.56	89.85
Sundaram Select Midcap	6.83	82.93
Taurus Starshare	9.82	80.88
Franklin India Prima	6.36	80.86
Taurus Discovery Stock	7.63	79.44
Alliance Equity Fund	10.12	75.15
Tata Growth Fund	8.78	74.22
SBI Magnum Multiplier Plus	9.90	74.21

Almost 92 per cent of the diversified funds has outperformed the Sensex, which gave a one-year return of 35.17 per cent. The best-performing fund was SBI Mutual Fund's Magnum Global Fund which gave a one-year return in excess of 100 per cent and was the only fund to do so. 

Laggards Diversified funds
	1 month	1 year
PRINCIPAL Global Opp Fund	0.78	3.28
LIC Equity Fund	3.34	21.98
SBI Magnum Growth - 99	--	26.90
LIC MF Growth Fund	3.46	28.01
GIC D MAT	7.97	31.46
Sundaram Select Focus	5.77	33.31
UTI Index Select Fund	7.12	35.19
UTI Mastershare	6.91	35.28
Franklin India Bluechip	6.30	35.51
UTI Primary Equity Fund	4.04	36.93

The next best performer - Magnum Sector Umbrella - Contra - was also from the SBI MF stable.