The Hindu Business Line : Volatile construction stocks upset funds' NAVs

Advertisement

Kolkata Feb. 19 Are construction and real estate stocks, which often make news because of their quirky behaviour, upset net asset values of equity funds that have piled on to them? With a number of funds stepping up exposure to these stocks in recent times, the fortunes of this unpredictable lot are now more firmly connected to those of the players that have more than a cursory allocation to the sector.

Fund sources maintain that quite a few construction stocks have vacillated in the last few weeks, retracting from their near highs and then gaining lost ground — a sequence that has influenced NAVs of some of the funds in question. At another level, the trend has once again cemented the belief that valuations in the sector have been generally turning far too steep for investors.

At the end of January, over a dozen equity funds had over 10 per cent of their net assets in construction and real estate, it is pointed out. These include funds managed by ABN-Amro MF, SBI MF, JM MF and Taurus MF.

Sources also point out that there is, perhaps, now a stronger case for paring exposure to these companies, a strategy that some fund managers seem to have lately considered.

Franklin India Opportunities Fund, which had close to Rs 800 crore under management at the end of last month, has, for instance, reduced its holding in construction (and cement) even as it has increased exposure to finance and pharma. Among the stocks it exited was Sobha Developers.

The fund's allocation to construction, which accounted for 21.45 per cent of its assets as on January 31, came by way of stocks such as IVRCL Infrastructures & Projects, Jaiprakash Associates, Simplex Infrastructure, Ansal Properties and D S Kulkarni Developers. Apart from the last-named stocks, the others were all part of its top-10 holdings.

Fund circles also suggest that select construction stocks, despite high valuations, may yet find takers in mid-cap funds. Already, some of them contribute critically to a few mid-cap funds' portfolios. These include Prudential ICICI MF's Emerging STAR Fund, which had close to 6 per cent in Patel Engineering, Ansal Properties and Gayatri Projects at the end of last month. Another small/mid-cap specialist, Sundaram SMILE Fund, had about 8 per cent in stocks such as Jaiprakash Associates, Madhucon Projects, IVRCL Infrastructures, Valecha Engineering and Tantia Constructions.

A handful of fund houses have marked investment in the sector, courtesy a range of products, it is pointed out.

More Stories on : Mutual Funds | Stocks | Real Estate & Construction

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Easterlies drive rain in South

We need land, water policies for industrialisation

Volatile construction stocks upset funds' NAVs

DGH disallows ONGC's gas discovery in KG basin

Indian power cos flock to Africa, Middle East

Tata Tea to divest stake in northern operations

Ceat plans to set up truck radial facility

TCS' defence, aerospace designs set for takeoff

Hind Copper to outsource mining to Australian co

Benchmarks lack direction in dull trade

SBI raises PLR by 75 bps

Sub-prime rates moving up

`Punish cos for Clause 49 non-compliance'

Bharti to invest $2.5 b in retail venture by 2015