The Hindu Business Line : Sundaram BNP Paribas India Leadership Fund: Hold

Investors can retain their holdings in Sundaram BNP Paribas India Leadership Fund. It has, since inception, generated a return of 56 per cent outpacing its benchmark index, the Nifty, by 8 percentage points.

The fund's objective is to invest in companies that are leaders in their respective sectors and among the top three in terms of net sales or revenue. However, the fund also has the leeway to expand its investments outside of these stocks, and it can also invest up to 35 per cent of its assets in emerging leaders. The leeway to invest in "potential leaders" allows the fund to make a substantial allocation to stocks outside the large-cap universe. Close to 15 per cent of the latest portfolio comes from stocks with a market cap of less than Rs 2,500 crore.

The fund's ability to invest in stocks outside of the bellwether indices broadbases the universe of stocks available for investment and allows it to tap into those with a higher growth potential. However, it also heightens the risk, making it more suitable for investors with a slightly higher risk-tolerance. Given its relatively short track record (two years) investors can track the fund's performance before committing fresh investments. The fund's record so far is restricted to a bull market. Since its launch in July 2004 the fund is yet to encounter any sustained bearish phase, except the brief correction witnessed in May-June 2006.

Performance: The fund's NAV has grown 47 per cent in the past year, during which it has marginally outpaced the Nifty. India Leadership Fund actively manages its portfolio and books profit periodically. Similar to the other funds from the Sundaram stable, India Leadership too tends to take active cash calls. It increased its cash position in end-May and June to 13 per cent and 20 per cent respectively and, as the market recovered, it reduced the same. In the latest portfolio, cash accounted for 2 per cent of assets.

Portfolio Overview: The fund, for its asset size, has a very diversified portfolio spread across 16 sectors. It has 56 stocks, with single-stock exposures restricted to 6 per cent. The top ten stocks account for 33 per cent of the assets. The investment strategy, which refrains from concentrated exposures, helps the fund to mitigate risk. However, the strategy can restrict returns on investment in a bull market.

Fund facts: Ms Srividhya Rajesh manages the fund. Its asset size is Rs 300 crore. The NAV is Rs 29.20.

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