Mutual Funds

Tata Pure Equity: Invest

Vidya Bala | Updated on September 08, 2012

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Tata Pure Equity is a good investment option for investors with limited risk appetite. The fund’s large-cap focus and its ability to contain downsides during choppy markets make it a good candidate for conservative investors.

Its return of 9 per cent compounded annually in the last three years is higher than the category average of 6 per cent and the benchmark Sensex return of 4 per cent. Since its inception in 1998, the fund has delivered 24 per cent annually.

Suitability

The fund is ideal for investors looking for an index-plus portfolio, with limited downside risks. Tata Pure Equity can be an addition to your portfolio, if you already own large-cap funds such as Birla Sun Life Frontline Equity. The latter has not only contained declines but also delivered superior returns in market rallies such as the one in 2009.

Performance

Of the over two dozen diversified equity funds that are benchmarked against the Sensex, only Tata Pure Equity, besides BNP Paribas Dividend Yield and HDFC Growth, managed to beat the index by over 5 percentage points (on annualised returns) in the last three years. Of these three, only Tata Pure Equity can strictly be termed large-cap focussed. The others hold more flexibility to invest across market capitalisation segments.

Tata Pure Equity made the best of the 2007 rally. But the fund got a little too defensive in the ensuing downturn in 2008 and took exposure to derivatives to cut losses. While this helped in the downfall, the fund was slow to deploy money back into equities in the 2009 rally.

Still, it made up well in the rally in early 2012, as it remained over 95 per cent invested in equities. Its year-to-date return of 18 per cent is a good 5-6 percentage points higher than large-cap focussed funds such as Franklin India Bluechip and HDFC Top 200. Its three-year record, as a result of the recent rally, is also a notch higher than HDFC Top 200.

Tata Pure Equity’s sector pick may also have helped it deliver better thus far in 2012. While most funds reduced their exposure to the FMCG space, the fund still has over 10 per cent of its assets in this sector. One of its top holdings, Hindustan Unilever, rallied over 60 per cent in the last one year, while ITC, yet another stock with high weight in the portfolio, rose 32 per cent in the above period. The NAV per unit is Rs 98.8.

Published on September 08, 2012

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