The Hindu Business Line : PruICICI Services Industries: Hold

A six-month return double that of its benchmark suggests that the fund made the right calls in a market driven by a limited universe of stocks after last May's correction.

Investors can retain their units in PruICICI Services Industries Fund. Its return of 49 per cent over the past year places it among the top ten performers compared to theme funds with broadly similar objectives. The returns also compare well with diversified equity funds.

The portfolio is broad-based relative to other theme or sector funds and appears more comparable to diversified funds. However, as the fund is just about a year old, it is yet to build a track record over a market cycle. A `hold' strategy, hence, appears more prudent.

The scheme aims at investing in companies that offer an opportunity to participate in the growth of services industries. This includes companies in IT, banking and financial services, construction and media.

Suitability: PruICICI Services has multiple sectors under its fold, and is thus different from typical sector funds and other services funds. This also suggests that the need for investors in this fund to make tactical calls in terms of entry and exit may be slightly less than what is required for sector funds. However, investors can avoid concentrated holdings in the fund as it does carry relatively higher risks than do diverisifed funds.

Performance: Over the six months ended December 2006, PruICICI Services Industries raced ahead of other diversified funds, as well as its benchmark S&P CNX Nifty. A six-month return of 55 per cent, against the benchmark performance of 27 per cent, suggests that the fund has been able to make the right calls in a market that was driven by a limited universe of stocks after the May 2006 correction. For instance, it capitalised on the banking rally between July and October before pruning exposures to the sector.

While the fund's peers, Tata Service Industries and UTI Services Sector, are not too far behind over the above period, a one-year trend indicates that PruICICI Services Industries has clearly outpaced its peers. It also appears to hold a more diversified portfolio than its above-mentioned peers.

The fund is invested in about 14 sectors, which is much more than UTI Services Sector's exposure of 6-8 sectors. Similarly, while Tata Service Industries has high exposure to IT (35-40 per cent), the PruICICI fund has so far restricted it to 27 per cent. This provides greater diversification within the theme.

The fund's one-year systematic investment plan (SIP) return of 77 per cent (as of December 2006) is much higher than the lump-sum return of 49 per cent, which is unusual. While the SIP has paid off well, this also reflects that the fund has seen high volatility on the downside during this period.

Portfolio: While the fund is heavy on mid-cap IT and construction stocks, the overall portfolio appears more balanced with about 65 per cent in stocks with market capitalisation of over Rs 2,000 crore. The fund has periodically booked profits in stocks such as Larsen & Toubro and Jaiprakash Associates while continuing to hold them. PruICICI Services Industries was launched in November 2005 and is managed by Mr Deven Sangoi.

More Stories on : Mutual Funds | Recommendation

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