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S. Vaidya Nathan

AN investment can be considered in SBI Magnum Contra Fund, as its portfolio appears to be well structured to capitalise on growth trends in the economy.

A judicious mix of large-cap and mid-cap stocks, with a tilt in favour of the latter could perk up returns. This has been the case over the past year, too. The portfolio is well diversified; a small asset base also adds to the attractiveness of the fund as it provides for a high degree of flexibility in fund management.

Over the past year, SBI Magnum Contra has been among the superior performers with returns of about 65 per cent. Annual returns of 55 per cent and 25 per cent over a three- and five-year period respectively highlight the consistency of the fund's performance.

It has weathered bearish phases in markets with limited downside and posted outsized returns during bullish phases. This explains why the fund has consistently outperformed its benchmark, the BSE-100, which is a tough index to beat.

This points not only to smart selection of stocks, but also the ability to take and pare exposures in a timely manner. As industrial growth continues to be impressive and investments have also perked up, earnings prospects for the companies that figure in the portfolio appear bright. This should cushion the downside risk even if there is a weakness in the broad market.

Investors could, however, take exposures in small lots by taking advantage of a systematic investment approach. This would ensure that they benefit from any weakness in the broad market, as there have been several corrective phases over the past year-and-a-half.

Suitability: Though it is positioned as a sector-specific fund, its investment objective permits exposures in several sectors, with IT, FMCG and healthcare being the exceptions. The risk levels are far lower than single-sector focussed funds and more in line with a typical diversified fund.

The returns have also compensated investors handsomely for the risk element. A policy of regular dividend payouts has ensured that investors have been able to cash in on a bullish phase and also take advantage of tax incentives. This fund should be among top choices for a portfolio of funds.

Portfolio overview: The portfolio is tilted towards infrastructure-related sectors — construction, cement and metals — and textiles. These account for about 50 per cent of assets. It had about 10 per cent in cash/cash equivalents at the end of January.

Notable large-cap stocks held are ACC, Gujarat Ambuja Cement, Cipla, Mahindra & Mahindra and Oriental Bank. It has exposures to several small-cap stocks such as Man Industries, Sri Adhikari Brothers, Bharati Shipyard, Gujarat NRE Coke and Welspun Stahl Rohren.

Fund facts: SBI Magnum Contra was launched in July 1999 as part of the Magnum Sectors Umbrella Fund. The minimum investment is Rs 2,000. The entry load is 2.25 per cent. There is no exit load. The fund manager is Mr Sandip Sabharwal.

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