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

Investors can hold on to their units in Sundaram BNP Paribas Rural India Fund. The fund’s one-year return of 51 per cent has placed it in the top quartile of the performance chart of diversified funds. The fund has also outpaced its benchmark BSE 500 marginally over the above period. Although a theme fund, Sundaram Rural has identified a larger universe of stocks across various industries that are said to focus on rural India.

Close to one-fourth of the assets is invested in non-rural stocks (the fund has differentiated its investments between rural and non-rural stocks in earlier fact sheets) such as Larsen and Toubro, Punj Lloyd, Thermax and BHEL.

Suitability: With a larger universe, the fund’s portfolio is not too different from diversified funds. Although launched close to the market correction in May 2006, the fund appears to have lost out on buying opportunities post the correction and under performed the benchmark.

As it is yet to test various market phases, it may be too early to seek a trend in its performance. Any fresh commitment to the fund can, therefore, be put on hold.

Performance: The fund has generated 79 per cent since inception in May 2006 and trailed the benchmark marginally. As BSE 500 can be said to represent the broad markets in general, outperforming the same, therefore, requires astute stock-picking. In the past 18 months, the fund has trailed its benchmark 12 times on a monthly rolling return basis but has seen some improvement in the last quarter, thanks to the rally witnessed by the large-cap stocks in the portfolio.

Portfolio overview: The fund has 51 stocks in the latest portfolio. It appears to actively churn its portfolio; Over the past six months, it has added afresh 7-10 stocks on an average every month. Only a handful of stocks stayed in the portfolio over the past one year.

Stocks such as Sesa Goa and Welspun Gujarat Stahl Rohren were added over the last four months. Asset allocation to capital goods got reduced as exposure to BHEL declined sharply. Metal stocks instead gained more weight in the last quarter.

Fund facts: The fund is managed by Mr J Venkatesan and the asset under management has declined from Rs 823 crore to Rs 573 crore in the past six months.

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