The Hindu Business Line : Fund houses looking more at `sensitive' sectors

Fund houses are increasingly looking at sectors that many of them have consciously avoided in recent times. Among them are real estate and FMCG - exposure to which has lately done some sections of the market more harm than good.

While most equity fund managers feel it is still too early to start critically increasing allocation to some of these areas, a number of them are said to be exploring opportunities to enter afresh. Developments concerning these sectors are being keenly watched.

The funds industry's exposure to the sensitive sectors - real estate is a major case in point - has sharply come down in recent days, which may be seen in the context of the sharply fluctuating valuations.

Mr Sanjay Sinha, who will shortly take over as CIO of SBI MF, said funds have largely booked profits in real estate. However, some have, despite paring exposure, still held on to select stocks, led by the belief that the sector's fortunes will turn for the better.

"It is unlikely that construction activity around the country will slow down," he maintained, while conceding that valuations of `land banks' have indeed been questioned by some sections. SBI MF, he added, is currently under-invested in areas such as FMCG, sugar and oil and gas.

Mid-cap funds

A number of mid-cap funds are still exposed to real estate stocks, it is further pointed out. Sundaram MF's Select Midcap, for instance, has 6 per cent of its overall allocation to the sector (as on April 30). Among its holdings are Ansal Properties, Madhucon Projects and Simplex Infrastructures. Further, Sundaram MF's Capex Opportunities Fund, which has somewhat lowered the weight due to rising interest rates, has over 7 per cent exposure to the sector.

Sugar stocks

The sugar sector, which has not really taken off after being beaten down, is also being examined carefully, fund circles suggest. Not too many players will have exposure to the likes of Balrampur Chini, a stock that has seen its 52-week high at Rs 190 or so and now trades at roughly Rs 70.

Sugar has benefited from news of export incentives (Rs 1,350-1,450 per tonne) to mills, in addition to creation of 20-lakh tonne buffer to deal with the glut, Mr Nilesh Shah, CIO, ICICI Prudential MF, noted in the context of developments taking place in March.

Modest exposure

While it is not quite easy to spot sugar stocks in portfolios, certain quarters still have modest exposure to FMCG companies, it is pointed out. However, some fund managers have in recent weeks booked profits in stocks such as Nestle and Triveni, sources observe, adding that their attempt to locate fresh entry opportunities here will continue.

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