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Suresh Krishnamurthy

INVESTORS in Taurus Discovery Stock can stay with the fund. It has performed well in the past year, recording returns of more than 100 per cent. This is almost twice the average for a mutual fund scheme in the same period.

The improved showing in the past year is, however, in stark contrast to its disappointing performance of the previous years. It may thus be inappropriate to add it to your holdings now.

The fund's stated investment strategy is unconventional. It seeks to invest in stocks that have under-performed the market or whose price is, for some reason, under pressure. This includes stocks whose price is below face value. Though the portfolio contains many stocks that may not strictly qualify for inclusion, the selection and the concentrated positions held make the fund unconventional.

Portfolio allocation: Taurus Discovery is a small fund with net assets under management of less than Rs 25 crore. It has been around for more than a decade now.

The top three stocks in its portfolio — NDTV, SRF, Jaiprakash Associates — account for nearly 50 per cent of net assets.

This has been the case for the past six months.

The fund holds nearly 30 stocks in its portfolio. Barring public sector companies such as Indian Oil, GAIL,

Neyveli Lignite and SAIL, there are no large-cap stocks in its portfolio.

Performance: The unconventional nature of the fund also enhances the risk involved. In the three years ended March 2004, the scheme registered positive returns in only 18 out of 36 months. The average for a mutual fund scheme during that period was about 24 indicating the risk involved in this scheme.

The performance since its launch in 1994 has generally been poor. Despite annual returns of 37.4 per cent per annum in the last three years, the fund's net asset value per unit is still at only Rs 12.15. This is reflective of the poor performance in the initial years. The fund has turned in returns of only five per cent per annum since launch.

It may thus be appropriate to hold on now, and verify if the fund is able to sustain the turnaround in performance before deciding to add to existing holdings.

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