The Hindu Business Line : Sundaram India Leadership: Hold

UNITHOLDERS can retain Sundaram India Leadership Fund. Its performance has been impressive since its launch in July 2004 and, over the past year, it has delivered a return of about 75 per cent, beating the benchmark Sensex by about 25 percentage points.

It now figures in the top 15 funds ranked on the basis of performance over a one-year period.

As the name suggests, the fund's objective is to invest in stocks of companies that are industry leaders. What sets it apart from the likes of Franklin Bluechip is that it also picks leaders from relatively smaller sectors, such as sugar and textiles, which may also be in favour in the market. As a result the fund does not have a strictly large-cap tilt and includes mid-caps as well.

While this provides scope for higher returns than large-cap peers, the risks are high too. This is particularly true because the fund does not stick to the leaders, but also has the mandate to invest up to 35 per cent in "emerging leaders".

This dilutes the advantage that a fund focused on industry leaders has to offer — a portfolio of high-quality, stable stocks.

The fund also adheres to Sundaram Mutual's focus on diversifying its portfolio across a host of stocks. The portfolio, therefore, covers a wide range of 20 industries or so, with no bias towards any particular sector. This might affect its ability to outperform if the market turns more selective on certain sectors. Investors can, therefore, avoid taking exposures to the fund now but wait for it to accumulate a stronger track record.

Portfolio overview: The portfolio comprises close to 70 stocks, with the top ten accounting for a little over 25 per cent of assets. About 70 per cent of the assets are invested in stocks with a market capitalisation of more than Rs 2,000 crore.

Lakshmi Machine Works, Bharati Shipyard, Tata Chemicals and BASF are some of the notable leaders that figure in its portfolio. The fund appears to have taken an active interest in initial public offers, with the stocks of AIA engineering, Shree Renuka Sugars, Tulip IT Services, Suzlon Energy, Educomp Solutions and Celebrity Fashions figuring in its portfolio.

Fund facts: Sundaram India Leadership Fund was launched in July 2004. The fund has an asset base of about Rs 150 crore. It offers dividend and growth options.

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