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S. Vaidya Nathan

INVESTORS in Tata Pure Equity Fund could consider cutting exposures by taking advantage of any rally in the broad market. The fund has underperfomed the benchmark indices in the past year, though almost all its peers have done better. In the last three months, too, the fund underperformed the market. Its aggressive approach to portfolio management has not delivered returns commensurate with the risks associated.

The fund has managed to turn in an indifferent performance despite the exposures to the information technology sector having been pared down to 4 per cent from 23 per cent in March 2001. This process appears to have taken a toll of the performance. The fund's 22 per cent exposure to the pharmaceutical sector has also not helped improve the performance. The fund's top holdings may have limited upside. In this backdrop, investors could consider switching to diversified funds with a consistent track record.

Suitability: Tata Pure Equity Fund is one of the more aggressive funds in terms of sectoral allocation changes, stock selection, and timing the markets. The risk profile has been considerably high, but the last two years' returns hardly compensate for the risk element. Only investors comfortable with high risk and aggressive portfolio management may consider investing in the fund.

Portfolio overview: The fund is now top heavy with stocks from the pharmaceutical and auto sectors. The Tata Pure Equity Fund also appears too diversified for comfort. The top ten holdings account for just 45 per cent of net assets. With a footing in 15 sectors, the fund would be required to make a large number of buy and sell calls, apart from continuing with the aggressive stock selection and portfolio churning. This may be difficult in the Indian context given the lack of depth in the markets. The fund now has no tech sector exposure in its top holdings, and this seems to have affected its showing in the last three months. It is almost fully invested with a cash position of around 10 per cent.

Fund facts: The fund was launched in May 1998. The fund offers entry at a load of 1.75 per cent of the NAV. There is no exit load.

The minimum investment is Rs 5,000 and Rs 500 for the systematic investment plan. The fund manager is Mr Shyam Bhat. The net assets are Rs 33.52 crore, capital Rs 36.09 crore and the NAV is Rs 9.26 per unit.

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