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Suresh Krishnamurthy

INVESTORS in Sundaram Select Focus can continue to stay with the fund. The performance of the fund since its launch in July 2002 has been a mixed bag. In the initial period, the fund's performance trailed that of S&P CNX Nifty, its benchmark. In the last three months, however, the performance has been much better. Fresh investments can, however, be avoided now. It would be better to view the performance record over a period before considering additional investments.

Performance: Sundaram Select Focus is among a handful of funds such as Zurich India Equity and Prudential ICICI Power that has recorded positive returns during recent months. The zero exposure to IT stocks during this period has helped the fund's performance. In addition, the fund is not fully invested.

The cash position in the fund was as high as 24 per cent at end-March 2003. Such a large cash position at a time when stock prices were falling has also helped. The large exposure to banks has been another redeeming factor.

Portfolio allocation: In terms of sectors, the top exposures are banks, healthcare, petrochemicals and electrical and electrical equipment. These sectors accounted for 52 per cent of net assets at end-March 2003. Only the exposure to banks is significantly large at around 24 per cent. Exposures to other sectors were lower than 10 per cent.

In terms of stocks, the top exposures were HPCL, Reliance Industries, Punjab National Bank, Ranbaxy Laboratories and Bank of Baroda.

The top five stocks accounted for 34 per cent of net assets at end-March 2003. Mid-cap companies such as Bharat Forge, ABB, Ashok Leyland and MICO accounted for just around 15 per cent of net assets.

The fund continues to be small sized with net assets under management just above Rs 5 crore. Such a small size proved to be an advantage in the past in the case of other asset management companies.

Since Sundaram Select Focus is expected to primarily focus on large-cap stocks, how much advantage the small size will provide remains to be seen.

Suitability: The fund is expected to hold concentrated investments in a few sectors and stocks. It is also expected to churn the portfolio aggressively.

The fund's risk levels are consequently expected to be higher relative to that of S&P CNX Nifty Index and that of properly diversified equity funds.

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