The Hindu Business Line : Tata Equity P/E Fund: Invest

Investments can be considered in Tata Equity P/E Fund based on its improved performance over the past two years. The fund underperformed the benchmark Sensex by a significant margin in 2006, thus impacting its last three-year performance. However, during the same period, it has managed to beat the category average by 5 percentage points.

The scheme’s mandate is to identify value stocks and invest at least 70 per cent of its assets in those stocks. The fund also holds the flexibility to invest upto 30 per cent in growth stocks. Value stocks are those that trade below their intrinsic value and stock of companies that are fundamentally sound but available at a steep discount due to certain factors.

To identify such stocks, the fund tries to identify companies whose price earnings multiple (price earnings ratio is calculated by divding the current market price by earnings per share) is below the benchmark BSE Sensex. Given the correction and subsequent volatility being experienced by the stock markets in 2008, several fundamentally sound stocks have been trading at a discount to the Sensex P/E.

This provides an opportunity for the fund to pick stocks in line with its objective. This fund appears suitable for investors willing to switch over from dividend yield funds as several of them are trailing the category average of diversified funds over a three-year period.

Performance: In a highly volatile period the fund has done well to conain its one-year declines to 1.5 per cent, performing better than its benchmark BSE Sensex, which generated a return of - 6.2 per cent.

It is to be noted that the fund has outperformed the Sensex despite holding close to 50 per cent in mid-cap stocks (stocks with market cap of less than Rs 7500 crore). On a rolling monthly return basis over the past twenty four months, the fund has outpaced the benchmark 70 per cent of the times.

Portfolio overview: As of July, the fund held 44 stocks and invested its assets across 19 sectors. The top three sectors accounted for 39 per cent of the portfolio. Majority of the stocks in the portfolio were trading below the Sensex P/E except stocks such as Infosys Technologies, HDFC Bank and Sterlite Industries.

The fund’s concentrated exposure(as high as 50 per cent) to top sectors on some occasions poses some risk. The fund has however been discreet in sector selection; it took a cautious stand on capital goods and construction – sectors that suffered sharp declines over the past one year.

More Stories on : Mutual Funds | Mutual Funds | Recommendation

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Tata Equity P/E Fund: Invest

Sundaram BNP Paribas Select Midcap Fund: Hold

SAIL: Buy

PSL: Buy

Index Outlook