Mar 19, 2008

Tata Equity Opportunities - Analysis

Tata Equity Opportunities — Riding growth story

Tata Equity Opportunities Fund invests predominantly in large-cap stocks, with a sprinkling of mid-caps thrown in. The fund is among the top performing over a five-year period .

An analysis of the fund over the July-December period reveals an active churn of stocks. During this period, as many as 20 stocks found their way into fund, while 29 saw their way out. These six months saw the fund's assets grow by 32.8 per cent to Rs 617.5 crore, while the NAV increased by 52 per cent to Rs 102.4 per unit, possibly because of a dividend payout and net redemptions.

Sector Moves: The top two sector holdings continue to be capital goods (18.5 per cent) and banks (9.4 per cent), albeit with slightly reduced exposures. Both the sectors had a fair run last year. Media, which rarely figures in the top sector holdings of funds, continues to be a preferred exposure.

Riding the India infrastructure growth story, construction and cement sectors have seen exposures increase three and five times respectively, to be among the top holdings. The fund also doubled exposure to power and ferrous metals . Both these sectors may be expected to do well in the medium term due to macro demand and supply scenario. Not surprisingly, due to fears of US recession and rupee appreciation impacting revenue visibility, the software sector (4 per cent) has seen exposures halved. Exposures in the telecom services (2.5 per cent) were reduced to a third of previous levels. The pharmaceuticals sector too saw exposure trimmed by half.

Stock Moves: Adlabs films, Reliance Capital and Sterlite industries, stocks that doubled over the July-December period, were added to the portfolio, as were SBI and SAIL. Jindal Steel and Power and Reliance Energy — stocks that gained over three times during the period — are also fresh entrants.

Other picks include Gujarat Mineral Development, Tata Chemicals, HCC and Gujarat State Fertilisers. Infosys Technologies and Tech Mahindra are out of the portfolio. ICICI Bank, Bharti Airtel, Siemens and Sun TV are some other high-profile exits.

Reliance Industries (4.5 per cent) is the top holding for the fund now and has remained with the fund during this period. . The fund continued to hold L&T, BHEL, Reliance Energy, and Crompton Greaves over the July-December period. Interestingly, IT stocks Satyam Computer and Tanla Solutions figure among the stocks that were retained.