The Hindu Business Line : Sundaram Select Midcap Fund: Invest

INVESTORS who have exposures to top-notch funds in the large and mid-cap space can contemplate allocating a part of their funds to Sundaram Select Midcap Fund.

The fund has an impressive track record over the past four years and its portfolio strategy remains unaltered. If it manages to sustain the performance trend, it is likely to be one of the superior performers in the mid-cap space. Investors could, however, take exposures using a systematic investment plan to phase out the process and benefit from any weakness in the market. Buy with a three-to-five year perspective.

Only Franklin Prima, among funds in this category, has a track record that is superior, and it remains our top pick in this space. Investors could, however, add a dash of aggressive exposure by accumulating Sundaram Select Midcap. The NAV of the fund has risen by about 65 per cent over the past year; it has generated annual returns of about 80 per cent over the past three years. Though returns of this magnitude are unlikely, going forward, the fund could generate attractive returns.

Sundaram Select Midcap has a portfolio tilt that is different from that of Franklin Prima. The former invests in stocks that have a substantially lower market capitalisation compared to Prima. It invests in a large number of stocks and has kept exposures to individual stocks at less than five per cent.

This strategy requires the fund to make a large number of calls; more so, since this fund tends to capitalise on momentum in the market. That the fund has managed to deliver attractive returns over three years indicates that it has been adept at implementing this strategy.

The fund has benefited from the several bouts of re-rating that mid-cap stocks enjoyed since early 2003. The fund has yet to go through a protracted bearish phase and in this respect, its track record has a gap compared to that of Prima. Its performance has, however, been consistently good across quarters, and this strengthens the case for adding this fund to your portfolio. The asset base of about Rs 375 crore is also likely to provide for flexibility in fund management, especially given the large number of stocks that fund usually has in its portfolio.

The fund's portfolio appears positioned on the expectation of robust economic growth and investment. Exposures to engineering and construction-related sectors account for about 45 per cent of assets. The fund has also taken a bullish stance on the automobile sectors.

In contrast to a few other top performers, the fund has tempered its exposures to the IT, banking and pharma sectors, which collectively account for only five per cent of assets.

If there is a slowdown in the economy, the fund's performance could be affected though its engineering sector exposures are likely to pay off.

Suitability: Sundaram Select Midcap has a diversified portfolio.

The risks are higher than compared to most diversified funds. It has, however, delivered more-than-commensurate returns for the risks involved.

The fund has outpaced benchmark indices and peer funds; this included Prima over the past year and lags over a three-year period by five percentage points.

More Stories on : Mutual Funds | Mutual Funds

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page