Mutual Funds

Tata Balanced: Invest

K. Venkatasubramanian | Updated on October 29, 2011

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Investors looking for a relatively aggressive bet from the balanced funds stable can consider buying the units of Tata Balanced.

The fund uses market rallies to its advantage but tends to lag at times when there is a protracted fall. The fund's performance over the last one year of volatile market suggests that it may be getting its act together in containing declines better than it did on earlier occasions.

Over one-, three- and five-year timeframes, Tata Balanced has managed to outpace its benchmark Crisil Balanced Index.

The fund has delivered a compounded annual return of 11.8 per cent over a five-year period, which places it among the top quartile of funds in the category. The returns are higher than that achieved by peers such as FT India Balanced and DSPBR Balanced.

During the rallies of 2006, 2007 and 2009-10, the fund has outperformed the Crisil Balanced Index. In the 2008-09 market meltdown, the fund failed to contain downside as it had substantial exposure to mid-cap stocks.

But in the volatile market of the past one year, the fund has done better in containing the slide in NAVs (-6.3 per cent) compared with its benchmark (-8.1 per cent).

Investors with a medium-risk appetite can consider buying units in the fund through SIP (systematic investment plan) route or deploy a small sum in the fund as a diversifier.

Portfolio and strategy: The fund's past exposure of almost a fourth of its assets in mid-caps (less than Rs 7500 crore market capitalisation) helped it outperform during bull markets. This was also a reason for its steep fall in 2008-09.

However, over the past one year, the fund has reduced the proportion of such stocks in the portfolio to around 15 per cent currently.

The sectors that the fund held among its top few holdings included banks, pharma, software and automobiles, all of which had a healthy run. Two sectors that have been trimmed substantially over the past 12-18 months from its top holdings are capital goods and construction, which have been heavy underperformers.

The fund, instead, increased exposure to consumer non-durables stocks over the last one year. This sector is the fund's top holding now.

Tata Balanced does not take concentrated exposure in individual stocks or sectors. Individual sectors rarely cross 12-13 per cent of the portfolio and in the case of stocks it is under 5 per cent.

This blend of market-favoured sectors, mid-cap stocks but non-concentrated holdings makes the fund only marginally aggressive than peers.

The debt portion of Tata Balanced appears to be conservative. NCDs(non-convertible debentures) and FRNs(floating rate notes) of institutions such as Union Bank Of India, HDFC and L&T Finance are some such AAA or CAA+ rated securities that the fund holds.

Certificates of deposits issued by Yes Bank, ICICI Bank and Axis Bank are some of the other debt investments. These account for over 25 per cent of the overall portfolio.

The fund has reduced the cash portion from nearly 11 per cent a year ago to a little over one per cent currently as it sought to take advantage of higher interest rates.

Published on October 29, 2011

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