The Hindu Business Line : SBI Magnum Contra: Invest

Investment can be considered in SBI Magnum Contra. The fund's track record over three- and five-year periods has been impressive. With its contrarian approach, the fund seeks to invest in stocks or sectors that hold potential for appreciation but are currently undervalued or out of favour.

Contrarian funds are normally suitable for patient investors willing to wait for a market cycle to reap good returns. Magnum Contra's three- and five-year returns of 70 per cent and 62 per cent place it among the top three among diversified funds. It outpaced the benchmark BSE-100 by a huge margin over this period. However, its strong performance reflects that it has not been strictly contrarian; its performance has got a lift from its overweight position in engineering and construction stocks that have been in market fancy.

Performance: The fund's tilt towards mid-caps during 2003 and 2005 helped it to generate fairly good returns. It made a timely shift to large-cap stocks last year; and stocks with a market cap less than Rs 2,500 crore now account for 15 per cent of the portfolio and the rest are invested in large-cap.

In the past year Magnum Contra generated a return of 56 per cent. This fund has a buy-and-hold strategy and book profits marginally. And stocks such as Arvind Mills and Welspun Gujarat Stahl Rohren, despite losing close to 50 per cent of the value since the start of the year, still enjoy the fund's confidence with only a marginal drop in holdings. Hindustan Zinc, ACC and IVRCL Infrastructure delivered handsome gains.

Portfolio Overview: The fund has 47 stocks in its portfolio and the top 10 accounted for 38 per cent. It has well-diversified sectors and the top three corner 32 per cent of the asset allocation. Capital goods still get the highest allocation, followed by the auto sector. In the banking space Oriental Bank of Commerce and Union Bank of India found fancy ahead of State Bank of India.

Fund Facts: Magnum Contra was launched in July 1999 and Mr Sanjay Sinha manages the fund. The fund has an asset base of Rs 1,335 crore. Minimum investment is Rs 2,000 and the entry load is 2.25 per cent.

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