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Suresh Krishnamurthy

INVESTORS in SBI Magnum Contra can stay with the fund. While its performance since early 2001 has been moderate, it has fared impressively in calendar year 2004. The fund's focus is on stocks whose earnings growth is linked to the economy and is also attractive from an investment perspective given that industrial growth continues to be impressive.

Magnum Contra is a small-sized fund. Its stated strategy is to invest in undervalued stocks that are now out of favour. However, in practice, the fund invests in stocks that are fairly priced too.

For instance, its portfolio at end-August 2004 had stocks such as Tata Motors, M&M, Maruti Udyog and Balrampur Chini. These stocks trade at price to earnings multiple that is higher than that of the indices. Still, the fund offers exposure to economically sensitive stocks. The fund invests in equal measure in both large-cap and mid-cap stocks.

Performance: Similar to most SBI Mutual Fund schemes, the fund had a forgettable year in 2000. The performance in 2001 and 2002 was better than that of such indices as CNX Midcap 200 and S&P CNX Nifty.

Its performance was also comparable to that of some its peers such as Franklin India Prima and Alliance Basic Industries.

In 2003, the returns trailed that of CNX Midcap 200 while outperforming Nifty comfortably. Both Nifty and the midcap index are not proper benchmarks for the scheme as the scheme invests substantial sums in both large-cap and mid-cap stocks.

Compared to a portfolio with a 60 per cent weight to Nifty and 40 per cent weight to CNX Midcap 200, the fund did show marginal outperformance. It recorded gains of about 102 per cent in 2003.

The fund has, over the years, consistently outperformed the mix of 60 per cent Nifty and 40 per cent CNX Midcap 200. In addition, the fund's performance in 2004 so far has been impressive, offsetting considerably the moderate performance in 2003.

Portfolio: At the end of August 2004, the fund had assets under management of about Rs 36 crore, with a cash position of about 11.6 per cent. The top five stocks were Gujarat Ambuja, Tata Motors, ACC, Arvind Mills and Apollo Tyres.

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