The Hindu Business Line : Birla Sun Life Equity: Invest

Investors can consider investment in Birla Sun Life Equity Fund based on its consistent performance over a five-year period. With the markets going through a highly volatile period, funds with a long-term track record and with higher exposure to large-cap stocks may be relatively better options.

Birla Sun Life Equity Fund has an investment strategy of investing across market cap segments. However, over the past few years the fund has been predominantly invested in large-cap stocks with about one-third of the assets in mid-caps. The fund’s three-year return through systematic investment plan (SIP) is -9.1 per cent against 4.7 per cent earned through lump sum investment. This is not surprising, as a good two out of the three years were bull markets, where units are typically accumulated at higher prices in peak markets.

However, with the markets under a bear grip, investments through the systematic option would help, as any additional units bought at lower costs will reduce overall average costs and provide base for earning optimal returns once the market revives.

When markets went through similar, though intermittent, rough patches between November 2002 and October 2005, the fund had generated an annualised return of 35 per cent (under SIP) and outpaced the benchmark BSE 200 by 14 percentage points (over this period fund was managed by Alliance Mutual Fund).

Performance: Over the past one year, the fund has declined by 53 per cent although the fall is marginally lower than its benchmark BSE 200. Anticipating a volatile market, the fund started holding 15 per cent in cash even during the beginning of 2008. As the markets started to correct it increased its cash holdings; in the October portfolio debt and cash holdings accounted for 29 per cent of the assets. Despite moving to the cash position, the fund struggled to contain losses as a result of mid-cap stocks (market capitalisation less than Rs 7,500 crore) in its portfolio. The mid-cap stocks held by the fund could however hold potential once the market revives.

Portfolio overview: The fund sports a well diversified portfolio of 41 stocks with stock-specific exposure restricted to less than five per cent of the assets barring the case of Reliance Industries and Bharti Airtel. The top-three preferred sectors over the past few months were banks, telecom and software, which together accounted for 28 per cent of the assets. The year to date correction in NAV is far higher than the decline in the total asset size. The difference suggests possibility of fresh flows into the fund. The fund is managed by Mr Mahesh Patil. The NAV per unit is Rs 128.7.

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