The Hindu Business Line : SBI Magnum Contra: Invest

SBI Magnum Contra continues to be a good investment option. In the months following the exit of key personnel, Magnum Contra has managed to sustain its good performance, as have other SBI funds. A contrarian strategy involves investing in stocks that are temporarily out of favour with the market.

A patient investor willing to hold on to the fund till the market discovers a sector or stock, should consider such a theme. The fund has managed to pull off this approach to investing quite well. It was an early entrant into mid-cap stocks.

The fund was also among the earliest to switch to large-cap stocks last year and capitalise on the rally in frontline stocks.

For a fund that rode the mid-cap wave between 2003 and mid-2005, it now holds only about 15 per cent in stocks with a market capitalisation of less than Rs 2,000 crore. In terms of sector selection, the fund does not currently appear contrarian. In fact, it remains bullish on engineering and infrastructure stocks, which have been piled on to the portfolios of many a diversified fund.

Stocks such as Ballarpur Industries, Apollo Tyres, Apar Industries and including Arvind Mills are the few offbeat stocks that figure its portfolio.

Performance: Had you invested in the fund last year at this time, you would have doubled your money. Over the past six months, it has turned in a return of about 40 per cent, the bulk of it over the past three months though.

This ensures that the fund remains among the top performers. Picks such as Bajaj Auto and Sintex have delivered handsome return. Sticking on steadfastly to capital goods has worked in its favour, as there continues to be a relentless upward trend in stocks such as Crompton Greaves, which has remained a top holding over the past couple of years.

Portfolio overview: Over the past year, Magnum Contra had had to cope with strong inflows thanks to its performance. Its asset base has expanded more than four fold to Rs 900 crore.

Against the measured exposures it was accustomed to taking a year earlier, its holdings in any single stock is now capped at about 5 per cent.

It has, however, contained the number of stocks to 35, which is not too big for a fund of its size. Auto is now a more prominent sector in its holdings, after capital goods.

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