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Aarati Krishnan

DIVERSIFIED equity funds have registered a sharp appreciation in value over the past year, in many cases, generating much higher returns than the broad market.

This may be an opportune time for investors to exit funds with an unsatisfactory long-term track record and rejig their portfolios. Taurus the Starshare falls into this category.

Some mid-cap cyclical stocks in its portfolio paid off in a big way over the past year. Investors may use this opportunity to book profits and lock into the gains. The recent rally brought the fund's NAV close to the initial investment value of Rs 10 per unit.

Over the past year, the fund generated returns of around 55 per cent, putting it among the top 25 per cent of equity funds, ranked purely on returns, just for the one-year time frame. But the performance pales if evaluated over a longer time period.

The fund has turned in marginally negative returns over a three-year holding period and has trailed a number of its peers, both over a three year and five year period.

Suitability: This recommendation applies to all of the investors in the fund. Booking profits at this stage in the market rally may help risk-averse investors avoid any downside risks arising from a correction, if it happens. Even for risk-seeking investors who are willing to take their chances on a market correction, it may be better to route investments through a diversified equity fund that has proved itself across different market cycles.

Portfolio and performance: The top portfolio holdings of Taurus the Starshare are quite unconventional and feature cyclicals such as Jaiprakash Industries, Crompton Greaves, Ceat, Ballarpur Industries.

Each of these stocks has generated spectacular returns over the past year, on the back of the mid-cap rally and the return of market fancy for "restructuring" plays.

But the exceptionally high returns of the past year may not be sustained, given the size of the moves in many constituents of the Taurus Starshare portfolio.

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