Unit holders of Canara Robeco Infrastructure can retain their holdings and keep a watch on its performance for one more year.

The fund’s return of 5 per cent annually in the last three years is nothing to write home about. But so was its benchmark index BSE 100’s performance of 4.5 per cent annually over this period.

The fund’s performance is also not poor if one considers the downturn faced by infrastructure and capital goods stocks in the last three to five years. The BSE Capital Goods lost a fifth of its value in the last three years.

Why hold?

Investors who have limited exposure to the fund and have already held it for the last few years can continue with the fund. While the infrastructure and capital goods sectors have been underperformers, an upturn in both infrastructure activity and capital expenditure activity in the country can benefit companies in these sectors.

Stocks in this space, including large players such as BHEL, are currently trading at modest valuations, providing potentially higher upside once earnings prospects improve.

It appears that the market may have already reacted in expectation of a revival in these segments. The BSE Capital Goods rose 24 per cent this calendar year as against , 15 per cent increase in Sensex.

Investors can watch for performance over the next one year and consider booking profits if the fund rallies abnormally as the theme is subject to cycles.

Performance

With a well-diversified portfolio of stocks in the energy, engineering and construction space, Canara Robeco Infrastructure has been among the better performers in its category. The fund has demonstrated good performance in rallies.

From the March 2009 lows, for instance, it has delivered an absolute return of 130 per cent, next only to Taurus Infrastructure.

HDFC Infrastructure managed 112 per cent over this period, while ICICI Pru Infrastructure climbed 66 per cent. Canara Robeco Infrastructure also did quite well in the 2011 volatility, losing 20 per cent, as against the 25 per cent fall in its benchmark BSE 100 as well as the Sensex.

The fund managed to contain declines by moving 10-12 per cent of its assets to cash on and off and also holding on to large-cap stocks.

As of July, 60 per cent of assets were in large-cap stocks of over Rs 10,000 crore and 13 per cent in cash and cash equivalents.

The cash holding may come in handy to deploy more when the theme shows better signs of revival. Until then, this may be a good way to combat volatility in the sector.

Canara Robeco Infrastructure’s point-to-point returns over three- and five-year periods may suggest that it struggled to beat its benchmark BSE 100.

But the fund’s rolling returns over the last five years suggest otherwise. On a one-year rolling basis, the fund managed to beat its benchmark 66 per cent of the times in the last five years.

That is a good score, considering that BSE 100 is not really an appropriate benchmark for this struggling theme.

The fund’s portfolio has reasonably valued large-caps stocks such as Power Grid Corporation and Coal India as well as mid-cap growth picks such as Sadbhav Engineering and VA Tech Wabag.

NAV per unit under the growth scheme is Rs 21.6.

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