The Hindu Business Line : Sundaram BNP Paribas S.M.I.L.E

Small and mid-cap stocks witnessed a lack-lustre market over the past year and those funds invested in such stocks have had a tough time keeping up with their diversified peers. Sundaram BNP Paribas' S.M.I.L.E (Small and Medium Indian Leading Equities) Fund seeks to invest in companies in the above-mentioned segment with high growth visibility. We take a look at how the fund managed its portfolio over January-March 2007, a quarter dominated by market volatility.

A number of funds once again increased their holding in the engineering sector and S.M.I.L.E was no exception. Asset holding in this segment increased from 14 per cent in December 2006 to 22 per cent in March 2007. IT replaced consumer goods to take the second slot, while holdings in the automobile sector were marginally pruned, though it remained among the top three sectors.

Among other sectors, the fund appeared to be cautious on cement and construction, where it reduced exposures.

In the capital goods space, the portfolio was clearly in favour of power equipment. While KEC International was the new addition, ABB, Areva T&D, and Indo Tech Transformers were accumulated. Among other engineering companies, Hindustan Dorr Oliver and Lakshmi Machine Works were added afresh while Easun Reyrolle and Atlas Copco saw an increase in holdings. IT stocks witnessed increased holding.

Four Soft, Moser Baer and Satyam Computer Services lost favour and exited. Shares in NIIT Technologies and Megasoft more than doubled while Tata Consultancy Services and Polaris Software also saw higher weights.

In the infrastructure space, the company decided to exit small-cap stocks such as Tantia Construction and Valecha Engineering and instead added Punj Lloyd and IVRCL Infrastructures & Projects.

The fund also treated real estate stocks with caution on the back of interest rate hike impact and SEBI norms for the sector.

Ansal Properties & Infrastructure was the only one added even as the fund sold KEC Infrastructure.

The fund viewed metal sector with optimism, adding Usha Martin and Steel Authority of India to its portfolio, thus increasing exposure to the sector from 4.5 per cent to 8 per cent.

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