Mar 20, 2008

Sundaram Growth Fund - Analysis

Sundaram Growth Fund: Hold

Investors can retain units in Sundaram Growth Fund in the light of its reasonable long term track record and good recent performance. The fund has outpaced its benchmark — BSE 200 — over one, three and five-year periods and outperformed other large-cap funds such as DSPML Equity, HDFC Equity and Kotak 30 during the past year. After the recent corrective phase, large-cap/blue-chip stocks may attract buying interest ahead of small-cap or mid-cap stocks.

Suitability: Being large-cap biased, the fund is suitable for investors with a risk appetite to take exposure to fewer sectors in the large-cap basket. The fund maintains stock-specific exposures at less than 5 per cent. However, compared to most diversified funds, Sundaram Growth has taken exposures to eight-nine sectors only, with significant concentration in a few .

Performance: The fund has delivered a CAGR of 50 per cent over the past five years. Performance relative to large cap peers has improved in the past one year. Exposure to sectors such as metals, financials, energy and infrastructure , were key holdings in the fund and this may explain the superior performance.

However, this has also made the fund more vulnerable to the recent market correction, with its NAV suffering a 20 per cent decline during the January 16-31 period.

Portfolio and strategy: The fund takes a concentrated exposure to sectors, with metals being the top-most sector with a 28.4 per cent exposure as of December 2007. Together with financial services and energy sectors, the three constituted over 60 per cent of the portfolio.

Over 75 per cent of the stocks are from the large-cap (market cap of more than Rs 7,500 crore) space. With mid-cap stocks now at reasonable valuations, stock picks here may provide some upside for the fund.

Fund Details: The NAV is Rs 96.07 per unit. Ms Srividhya Rajesh manages the fund.