The Hindu Business Line : Sundaram Select Midcap: Invest

Investors can consider exposure in the fund through a six-month systematic investment plan, which will ensure that they capitalise on any broad market weakness.

Every time you think this fund could run out steam, it sneaks in a scorching performance that lasts a few months. If you take a look at the portfolio, you may at times feel uncomfortable and get the feeling that the fund is riding the momentum in the market. It has done so several times now that there is a high degree of consistency to the performance. It has been one of the superior performers over the past year with the NAV doubling.

Sundaram Select Midcap focuses on mid- and small-cap stocks and has benefited from the several bouts of re-rating that stocks in this space have enjoyed over the past three years. It has, however, zeroed in on the right stocks and sectors and also aggressively managed its exposures. For instance, in December, when we had our latest call on the fund, it had close to 45 per cent of assets in the engineering and construction sectors.

The substantial gains notched by stocks from these sectors have ensured that the fund figures among the top five performers over the past six months. Having reaped the benefits, the fund has now pared exposure to these sectors. Though construction remains the preferred sector, it has cut exposure to the engineering sector. Auto components and sugar have a dominant presence in the portfolio with Balrampur Chini being the top holding. These choices are likely to pay rich dividend.

Among funds with a focus on the mid-cap space, Sundaram Select Midcap has also managed to open a gap on Franklin Prima though the latter remains one of our preferred picks; it has a long-term track record that dates back more than ten years. Sundaram Midcap has comfortably outpaced benchmark indices. The asset base of Rs 475 crore provides for a high degree of flexibility in fund management and is a positive. It owns a large number of stocks and ensures that concentration levels to any stock are maintained at less than 5 per cent.

In this backdrop, investors could consider exposure in the fund through a six-month systematic investment plan. This will ensure that investors capitalise on any broad market weakness. A systematic investment plan in this fund over the past three years would have provided attractive returns. Investors can opt for the dividend re-investment option.

Fund facts: The minimum investment is Rs 5,000. There is an entry load of 2.25 per cent. There is no exit load. Mr J Venkatesan is the fund manager.

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