Mutual Funds

Tata Equity P/E Fund: Invest

Srividhya Sivakumar | Updated on December 31, 2011

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Tata Equity P/E fund, which focuses on value investing, makes a good investment choice in the present market. While the fund (like other value-investing funds) also scouts for undervalued companies, its investment approach is a tad different. It filters stocks primarily using their price-earnings multiple such that at least 70 per cent of its portfolio is invested in stocks with rolling P/E multiples lower than that of its benchmark Sensex.

With markets now being a ripe playfield for value pickers — with even growth stocks sporting a value look — the fund's investment approach can be expected to yield results over the long term. That it also sports an impressive scorecard and invests across market capitalisation categories only add to its charm.

Suitability: Though the fund comes with a ‘value' tag, it is not as low on risk. The fund sports a significant mid- and small-cap exposure — at least a third of its portfolio has been invested across these stock categories last year. While the multi-cap approach has helped it during secular rallies, its performance during volatile markets has been chequered. This makes the fund a good fit for investors looking for long-term returns only.

Performance: Tata Equity P/E has underperformed its benchmark mildly over the year. It has, however, outpaced the bellwether by comfortable margins over longer time frames. Focus on low PE stocks and exposure across market capitalisation has helped the fund put up a neat long-term show. While the fund's performance during volatile or weak markets has been quite plaid, it has more than made up for it in the long run. For instance, while the fund managed to put up a commendable show in the difficult markets of 2008 — despite its mid and small-cap exposure it managed to restrict its NAV slide within a percentage point difference to the Sensex — it failed to impress during the volatile markets in 2010 and 2011 (so far). Its long-term performance despite this, remains impressive, thanks to its ability to participate in market rallies. Both in 2007 and 2009, the fund's returns put it in the top quartile in its category.

Portfolio: The scheme's average P/E at 14 times compares favourably with that of the Sensex, what with stocks from sectors such as software, oil and banks making up its top three sectors. The fund's portfolio is fairly diversified with over 60 stocks; top ten add up to 35 per cent only.

Published on December 31, 2011

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