The Hindu Business Line : Tata Contra Fund: Hold

If the market remains range-bound and volatile, the fund's performance will hinge on selection of themes, identifying sectors and picking undervalued stocks.

Investors can retain their investment in Tata Contra fund. Its performance since inception has been lacklustre, with negative returns of 8 per cent, which is similar to other contra funds such as DBS Chola Contra and Kotak Contra.

It is, however, too short a period to judge the Tata Contra performance, particularly because the market saw a big sell-off over the past month.

Tata Contra, as its name suggests, aims at investing in fundamentally sound companies that are trading below their intrinsic value.

Contrarian funds require investors to stay with them for a longer period, to reap the benefits of the offbeat strategy.

If the market remains range-bound and volatile, the fund's performance will hinge on selection of themes, identifying sectors and picking undervalued stocks. Given its short tenure since inception and a reasonably good portfolio of value stocks, investors need to track the fund over the next few months.

Tata Contra's performance lags its established peer, Magnum Contra. The fund has trailed its benchmark index CNX 500 for the past six months.

Those looking for fresh entry can consider a systematic investment plan in Magnum Contra, which has proved its performance during different market cycles.

The Tata Contra portfolio consists of a mix of large and mid-cap stocks. The exposure to stocks with market capitalisation of less than Rs 2,500 crore has picked up sharply in the past six months and now accounts for 33 per cent of the total assets.

In the same period, Sensex touched its peak and notched up returns of 35 per cent. The fund's overexposure to mid-caps appears to have affected its performance.

In line with its objective, Tata Contra appears to have taken a contrarian view on the non-ferrous sector. It had an exposure in Hindalco Industries, which accounted for 4.4 per cent of its assets. It moved out completely from this stock in March but staged a re-entry in May. However, the metals meltdown has hit it hard, and might have dragged down its returns.

Portfolio Overview: The top three sectors — consumer non-durables, pharmaceuticals and banks — constitute 35 per cent of the total assets. The top ten holdings accounted for 42 per cent of the portfolio.

Prominent stocks such as Dr Reddy's, HLL, ITC and ONGC have figured in the portfolio since inception. Mid-cap stocks Bombay Dyeing, Karnataka Bank, Marico and Punjab Tractors have also been in the portfolio since launch.

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