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

Over one and three-year periods, the fund has been among the top quartile of diversified equity funds. Investors with a reasonable risk appetite may continue holding the units of this fund.

A concentrated exposure to preferred themes in the market has benefited the fund during the bull phase. But despite such exposures, the fund has been able to protect downside well during market falls over the last couple of years. Declines in the recent market fall weren’t much higher than its benchmark, the Nifty.

This fund may be suitable for investors who are willing to bet on a fund whose portfolio looks to be midway between diversified and theme funds. The fund seeks to invest in leading companies within a sector. However, the presence of ‘emerging’ leaders and a good sector spread, lends it a flexi-cap flavour.

Sundaram India Leadership has a track record of less than four years. But on one and three-year bases, which have been challenging from a market perspective, the fund has delivered returns that comfortably beat the Nifty.

It has also managed to stay in the top quartile of diversified equity funds in these periods. The fund’s ability to contain losses better than the Nifty during the market falls of October 2005 and May 2006, lends further credence to its record. In the current year, the fund, after underperforming the benchmark for the first three months, has managed to post positive returns since March.

Strategy

The fund’s portfolio over the last year indicates a large-cap (over Rs 7,500 crore) bias, but about 25 per cent of the portfolio was also invested in mid and small-cap stocks, helping greater participation. But mid- and small-cap stocks are also subject to earnings blips, which may cause share price volatility, thus affecting the NAV.

Financial services, metals and energy stocks figure prominently in the current portfolio. After a good 2007, these are sectors that were hammered in the market correction for a good part of this year. With valuation levels beaten down, an upside in these sectors may be a positive for the fund.

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