Sundaram BNP Paribas Capex Opportunities-Fund With Flexibility

At around this time last year, no one was even remotely cued in to the fact that the bulls would soon strongly bang on the doors and that the markets would globally take a sharp U-turn post the US financial crisis and the Lehman meltdown. The Indian market in the last one year has bounced back sharply from its lows and has risen by over 95 per cent (BSE Sensex). However, one has to note that not all the sectors outperform or underperform in tandem. It can be said that the market follows a particular theme at a given point in time and being invested in the right theme at the right time can be more beneficial. Given that, one can track the upcoming trend. Let’s understand this with an example. In March last year, if one had invested in metal stocks (stocks here means the underlying benchmark index), these fetched the highest returns amongst the BSE sectoral indexes with a score of 237 per cent while consumer durables, auto and bankex stocks yielded 170, 167 and 154 per cent respectively. Meanwhile, FMCG and oil & gas stocks provided returns of only 46 per cent, less than half of even what the BSE Sensex had produced.
With the Union Budget continuing to lay emphasis on the infrastructure sector with an improved allocation of over USD 245 billion in the XIth Five Year Plan, favourable demographics and supply-side deficit, it’s obvious that this will run down well for companies operating in the infrastructure and capital goods’ sectors. This fund is positioned to capitalise on the current investment story in India and thus it invests primarily in this theme or the companies engaged in these sectors.
This fund allows lots of flexibility to the fund manager and permits investment across stocks, sectors, market-caps as well as cash calls. It also allows allocating funds, though not more than 30 per cent of the total assets, outside this theme. Thus, such diversification reduces sectoral concentration and carries lower risk than the other funds. However, it may result in a deviation of the fund’s performance from that of its benchmark.
In February, over 62 per cent of its net assets were invested in the engineering and construction stocks. And it flaunted a well-diversified portfolio of 63 stocks wherein the top 10 scrips contributed a modest 36 of the total assets. The contribution of over 51 stocks stood less than 2 per cent of the portfolio, which says it all. However, the fund has taken aggressive calls on cash – as it is fully invested and has increased its exposure to the mid and small-cap stocks with over 80 per cent of its assets parked here. After a good start to its career, with it being among the top funds in the diversified category, its only damp squib was in CY08. Still, it has outpaced the category by over 3,319 and 450 basis points in one and three years respectively. Srividhya Rajesh, who is associated with the AMC since 1996, has been managing this fund right from its inception. Such a long tie-up ensures stability and consistency in the fund’s performance. Considering the fund’s aggressive portfolio strategy and performance, only high-risk investors can take limited exposure to this fund through SIP.