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Slow to shed holdings in banking and financial stocks, Tata Pure Equity saw one-year return of 5.2 per cent fall short of the benchmark Sensex’s 8.6 per cent. Over the longer term, the fund has fared well.
Compounded annual return over the last ten years is a strong 21 per cent, beating the Sensex’s 16 per cent by a wide margin. Performance has been better than peers’, such as DSP BR Equity and HDFC Equity.
The fund has also been able to contain downsides during market corrections, though gains during bull runs are not spectacular. Tata Pure Equity’s portfolio tips towards the Sensex index’s stocks, giving it the character of an index-plus fund. Investors can retain holding in the fund.
Tata Equity Management Fund, a large-cap oriented equity fund, has been merged with Tata Pure Equity from March this year.
Performance
Over the five-year period, the fund has delivered a compounded annual return of 8 per cent, better than the Sensex by about three percentage points. But in the one- and three-year periods, returns have fallen short of the benchmark. Much of the poor performance can be attributed to the heavy reliance on banking and financial stocks, such as Axis Bank and ICICI Bank, which have fallen sharply.
A measure of infrastructure and power stocks in a concentrated portfolio also stymied returns. On an annual rolling return basis over the past five years, the fund has beaten its benchmark 73 per cent of the time.
Portfolio
Tata Pure Equity has a concentrated portfolio, with the top five holdings accounting for up to 36 per cent of holdings.
A 33 per cent tilt towards banking and financials at the start of this year has only recently been cut. The fund has recently increased the share of software stocks. Along with outperformer HCL Tech, the software sector has now the highest share in the portfolio. Holding in telecom too, has been raised recently. These sectors hold good potential, but have seen a fair bit of price rise.
However, the fund has taken timely sector calls in earlier years. For instance, capital goods and infrastructure holdings were pared just after the end of the 2010 bull run. The fund hasn’t gone overboard on pharmaceuticals and FMCG either, giving it a more balanced portfolio.
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