Investment can be considered in Tata Pure Equity fund on the back of sustained three and five-year returns.
The fund seeks to invest in fundamentally undervalued large-cap companies. But the current portfolio does not appear to hold too many stocks from the above-mentioned category.
The fund has outpaced the benchmark BSE Sensex by a huge margin during the five-year period. Of the 41 stocks in the fund’s portfolio 14 are from the Sensex basket, thus taking advantage of the narrow index rally.
Suitability: It being a large cap fund, its risk profile is more subdued when compared to a diversified flexi-cap fund as the large-cap tilt may provide some cushion during declines. While the fund is actively managed in terms of picking the right sectors and stocks, its portfolio churning is less aggressive. However, the fund ensures locking-in gains through periodical and systematic booking of profits. Investors opting to invest in the fund can route their investments through a systematic investment plan as this route has generated superior returns, perhaps capitalising on the volatility witnessed in the markets.
Performance: The fund has generated a return of 56 per cent and outpaced the benchmark by 11 percentage points. During the same period, an investment through the SIP route would have earned 80 per cent.
On a monthly rolling return basis, the fund has managed to beat its benchmark only on 12 of the last 24 months. The outperformance on those occasions has however been substantial, thus generating adequate returns for the risk undertaken.
The fund has particularly been successful, so far, in identifying sector downtrends, thus containing losses. For instance, during the early part of the year, it completely moved out from cement stocks before the sector underwent a huge correction. It similarly pruned exposure to IT stocks on initial signs of the sector underperforming the broad markets.