Analysing fund portfolios

ANALYSING FUND PORTFOLIOS

The fund managers of top 3 diversified equity funds (in terms of returns on their growth options) were asked to share their investment strategies. For the calendar quarter ended 31 March 06, they were assessed in terms of changes in their portfolios over the quarter. Here is the analysis.

Performer Number 1

Tata Select Equity Fund

The scheme has topped the returns chart for the calendar quarter ended March 06 with a return of 33.81%.

Sector wise Portfolio analysis:

Over the quarter ended March 06, the fund manager has reduced exposure in the auto / auto ancillary and significantly increased exposure in the telecom sector. The sectors focused on are auto / auto ancillary, (even though exposure has been reduced, this sector still forms about 7% of the portfolio) electrical appliances / equipment, electronics, engineering, oil / gas / petroleum products, power and telecom.

Scrip-wise portfolio analysis:

Over the quarter ended March 06, the fund manager has exited from IVRCL Infra-structure. New companies added to the portfolio during this quarter

Performer Number 2

Sundaram Capex Opportunities

The scheme has achieved the status of an admirable second on the returns chart for the calendar quarter ended March 06 with 33.65%.

Sector-wise portfolio analysis:

Over the quarter ended March 06, the fund manager has increased exposure in the engineering and housing / construction sectors. The March 06 portfolio indicates focus on the auto / auto ancillaries, electronics, engineering, housing / construction and power sectors.

Scrip-wise portfolio analysis:

Over the quarter ended March 06, the fund manager has exited out of Aurionpro Solutions, Reliance Capital Ventures, Reliance Energy Ventures and Reliance Natural Resources. New companies, which form part of the March 06 portfolio are B L Kashyap, HEG, Kirloskar Brothers, Pratibha Industries, TIL and Valechha Engineering.

The Fund Manager said that Sundarram capex opportunities fund focuses on companies which are beneficiaries of the ongoing boom in infrastructure spending as well as the corporate companies’ capital spending. The focus has been on the capital equipment suppliers, construction companies and turnkey service providers, and this has helped the fund out perform.

The outlook is promising for these companies since they have a strong order book growth and good visibility for the next few years. Given that India has not invested enough in the last few decades in strengthening its infrastructure, and in order to support the current high economic growth rate, substantial spending is required. Similarly most corporate companies are operating at peak capacity utilization, which is likely to translate into orders for these companies.

Performer Number 3

Kotak Mid-Cap Fund:

The Scheme has stood a happy third on the returns chart for the calendar quarter ended March 06 with 31.66%.

Sector –wise portfolio analysis:

The scheme has significantly reduced exposure in the banking sector and increased exposure in the steel sector. The fund manager has focused on the engineering steel, sugar and textile sectors.

Scrip-wise portfolio analysis:

Over the quarter ended March 06, the fund manager has exited from Andhra Bank, Birla Corporation, Sesa Goa, Vimta Labs and Visual Soft Technologies. New companies which have been included in the portfolio are Gujarat State Petronet, JSW Steel, Monnet Ispat, Sical Logistics and Tata Metaliks.

The Fund Manager commented that for Kotak Midcap Fund the bottom up stock picking approach has been followed. For an investment to be profitable, three things are important business prospects, management capability and valuations. We look for business with bright prospects in terms of growth and cash flow, backed with strong management team and available at a significant discount to its intrinsic value. Additionally, in our Mid-cap fund, we focus on owning potentially large companies of tomorrow.

In conclusion, a mutual fund scheme’s investment portfolio reflects the fund manager’s investment strategy and choice of stocks. It is important to understand the investment strategy adopted and sectors and companies selected, before making your investment decision.

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