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Suresh Parthasarathy

The fund hasn’t fared too well in the recent meltdown, with the year to date NAV correcting by more than 50 per cent. However, the good long-term record and the fund’s flexicap mandate make it a reasonable investment at this juncture. Over a five-year period, the fund has generated compounded annual returns of 35 per cent and outpaced the category average by 15 percentage points. This solid performance places it among the top diversified equity funds.

Portfolio strategy: In a rising market, the top sector exposures matched favoured sectors in the market, such as capital goods, banking and metals. The fund prefers a mix of large, mid- and small-cap stocks in its portfolio. However, in recent years, it has predominantly invested in large-cap stocks.

Based on the fund’s investment strategy, it appears ideally suited for an investor willing to assume moderate risk profile. Contrarian funds usually strive to pick stocks that are out of market favour. Seen in this sense, the Magnum Contra fund’s portfolio over the past few years appears to fit that of a diversified fund more than a contrarian fund. This restricts its ability to contain downside risk in a falling market.

Performance: Magnum Contra has comfortably outpaced the diversified equity category average over the past five years. Over a two year period, it has also contained downside to levels lower than the benchmark BSE 100 and S&P CNX Nifty, despite a sizable exposure to mid- and small-cap stocks.

Portfolio Overview: The latest well-diversified portfolio featured 72 stocks, with the top three sectors accounting for 33 per cent of the assets. Over the past year, the asset size declined marginally by 6.5 per cent in comparison to the NAV decline of 41 per cent. This suggests that the fund attracted substantial fresh inflows.

As per the latest portfolio, cash holdings account for 15 per cent of the assets. The fund is not aggressive in churning its portfolio and the buy and hold stance may provide comfort to the investors.

The fund made some interesting stock choices during the past five months. It added Axis Bank, ICICI Bank, Hindalco, IVRCL and BPCL to the existing holdings, while it pruned exposure to Cipla, BHEL and Larsen and Toubro.

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