SBI Emerging Businesses

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We like this scheme for the assumed risks it takes by investing in emerging business themes based on exports and outsourcing for which it has been handsomely rewarded.

 

Strategy
Although the fund watches out for the opportunities in sectors based on general economic patterns, its concentrated exposure to certain sectors makes it similar to sector funds. According to the fund manager, there is no restriction on buying stocks as long as the valuation comfort exists. Since 2009, this fund has also increased its exposure to small-cap allocation that went up from an average 24.8 per cent in 2008 to an average of about 45 per cent as of now. The average market capitalisation of this fund is Rs 7,361 crore, which is on the lower band in the category.

This fund restricts investments to a particular business to around 25 per cent. Further, it maintains a tight portfolio of about 25 stocks, which is the lowest in the category, leading to higher allocation to select stocks that goes as high as about 7 per cent. The plan to increase cash holdings and allocation to large-caps has aided performance. Between August 2011 and March 2012, cash averaged over 13 per cent, compared to 5 per cent for the category.

 

Performance
It has consistently outperformed its category average, except in 2008, and stays fully invested with over 90 per cent equity exposure on most occasions. A regular top-2 quartile performer, the fund was the best performer in 2011. It managed to do so by moving away from interest-sensitive sectors such as auto and banks, and increasing the exposure to consumer space which allowed it to check its fall.

Since 2008, the fund has been consistently doing well by maintaining a higher mid- and small-cap exposure in select stocks. For instance, in 2009, the fund had investments in Mcnally Bharat Engineering, Sunil Hitech Engineers and Blue Dart Express, which aided performance. Similarly in 2010, higher allocation to stocks such as Page Industries and McDowell Holdings, and to auto and consumer durable sectors paid off. The sustained superior performance has resulted in the assets of this fund swelling and attracting investments.

 

Why invest?
A consistent performing fund with higher allocation to small cap stocks, poses risks that have played out making it a suitable option to investors willing to take risks.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

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You can write back to us at PrajnaCapital [at] Gmail [dot] Com

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

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