Dot on target

Written by Dhirendra Kumar | Updated: Dec 30 2007, 05:01am hrs
The huge run-up in the infrastructure sector worked wonders for various mutual funds and has put most real estate companies on top of the returns charts. Indeed, it would be an understatement to say that the theme has played very well.

Increased spending on infrastructure in the country has proved to be a boon for capital goods companies like BHEL, Larsen & Toubro, Punj Lloyd etc.

Of course, infrastructure is a somewhat loosely defined term. Each fund house can shape its own idea of what can be included under this theme like energy, oil and gas, construction, real estate etc.

Broadly speaking, all of them focus mostly on the capital goods and engineering sectors. So, stocks like Reliance Industries, BHEL, Thermax, Larsen & Toubro, Cromptom Greaves and Siemens figure among the common holdings of most of these funds.

We bring you the list of 10 hot funds over the past one year. Though not all of them are pure infrastructure funds, but those who are not, have significant holdings in that sector.

* Canara Robeco Infrastructure

What worked for the fund!

The funds high exposure to energy and basic/engineering sector did the trick. Notably, the fund holds Walchandnagar Industries since April 2006, which has proved to be a multi-bagger. The stock price surged 793% in a year. It is now its second largest holding.

Big Bets

Walchandnagar Industries, Reliance Industries, L&T, Grasim, BHEL, Siemens

How it did in downturn

Funds benchmark is BSE 100. The fund fell 16.65% in the second quarter of 2006, far more than the 10.6% fall of its benchmark. Continuing the poor run, the fund fell by another 8.2% in the first quarter of 2007, almost matching the 6.69% fall of its benchmark.

Background

Small fund managing just Rs 157 crore when other infrastructure funds are managing over Rs 3,500 crore. The funds AUMs touched a low of Rs 72 crore in March 2007.

* ICICI Pru Infrastructure

What worked for the fund!

The funds high exposure to the energy proved its mettle in identifying the trends. Of late, the fund has bought even more of energy. From around 17% in February 2007 the sector now commands 27% of its portfolio. Its earlier exposure to basic/ engineering also proved to be beneficial.

Big bets

Reliance Industries, NTPC, Jindal Steel and Power, Patel Engineering, ONGC and Bharti Airtel

How it did in downturn

In the second quarter of 2006, the fund fell 12.80% while in the first quarter of 2007 the fund was down around 5%. In June quarter of 2006, the funds fall was more than its benchmark S&P CNX Nifty (-10%). However, in the March 2007 quarter, the funds calls paid off and its fall was almost similar to its benchmark (-5%) and less than the equity diversified categorys 6%.

Background

The fund was launched in August 2005. Its AUM has gone up multiple times to Rs 3,538.80 crore. The fund is structured to exclude technology, FMCG and pharmaceutical companies. The fund always keeps 35-40 stocks in the portfolio.

* JM Basic

What worked for the fund!

The funds large cap bias changed after Sandip Sabharwal took over. He changed the complexion of the fund to mid-caps. The problem of domination by few sectors was dealt with by broadening the investment mandate.

Big bets

HCC, PSL, Bharti Shipyard, Action Construction, Kalpataru Power Transmission (sold in October 2007).

How it did in downturn

In the second quarter of 2006, JM Basic fell by more than 18%. This was much more than equity diversified categorys 13.60% fall. However, after the new fund team brought some visible changes, the fund protected the downside well. In the first quarter of 2007, when the Sensex was down 6.24% and the category had lost 5.97%, the fund had lost a marginal 0.48%.

Background

JM Basic is an old fund and was amongst the two petroleum sector funds, the other being UTI Petro. In the new avatar, the fund was launched in June 2005. CIO, Sandip Sabharwal and fund manager Asit Bhandarkar who joined in December 2006, are credited with its turnaround. Certain sectors like banking, pharma and technology wont find a place here.

* Reliance Diversified Power

What worked for the fund!

The stocks in its portfolio are either pure power plays or those that have a significant exposure to the sector, which have had a huge run up in the last one year. The fund can be credited for picking several multi-baggers.

Big bets

Torrent Power, Reliance Energy, Jindal Steel and Power, ABB Punj Lloyd and JP Associates.

How it did in downturn

The fund has its own customised benchmark, India Power. During the first quarter of 2007, the fund fell 5.71% compared to the Sensexs 6.24%. This was in line with the diversified equity categorys 5.97%. In the second quarter of 2006, when the Sensex and the category were down by 8.25%, and 13.6%, respectively the fund lost much more.

Background

The fund was launched in April 2004 and basic/engineering and energy account for almost half of its portfolio. The fund has the flexibility to go even 100% in cash and equivalents. For the past six months the cash component has been very high (In October 2007, it touched 28%).

* Standard Chartered Premier Equity

What worked for the fund!

The funds top holding during the most of the last year Areva T&D paid off well. Stocks like Srei Infrastructure Finance also proved to be very rewarding. However, the fund always had high exposure to the services sector.

Companies like Pantaloon and Deep Industries figure prominently in the portfolio. High exposure to basic/engineering also contributed to funds performance.

Big bets

Areva T&D India, Deep Industries, Pantaloon Retail (India) and Srei Infrastructure Finance

How it did in downturn

Benchmark is BSE 200. In 2006 June quarter the fund lost 24% while in the first quarter of 2007 the funds loss was 1.37%. The fund was able to protect the downside in the second quarter of 2007 only when the category fell 5.97%.

Background

It is a mid-cap fund, launched in September 2005. The fund currently manages Rs 530 crore. Fund manager Kenneth Andrade, who joined in February, was able to leverage the funds small size to its advantage. He did not shirk from taking concentrated bets in specific sectors.

* Sundaram BNP Paribas

CAPEX Opp-G

What worked for the fund!

Heavy concentration in top three holdings has worked very well for the fund as those stocks have been multi baggers. The fund manager refrains from frequent churning and patterns of continuity can be seen.

Big bets

Larsen and Tubro, BHEL, ABB, Thermax, Siemens, Sesa Goa

How it did in downturn

It erred with its entry/exit timing in stocks like Avaya Global Connect, HEG, Pratibha Industries etc.

Benchmark is BSE CG. In the second quarter of 2006 the funds loss was 13.79% while in the first quarter of 2007 it was down by almost 10%. In the second quarter of 2006, it beat its benchmark, which fell around 16%. However, in the first quarter of 2007, the fund lagged behind its benchmark by a huge margin. The BSE CG was down only 1.3% during this period.

Background

The fund was launched in September 2005. From October 2006, the funds AUMs have doubled from Rs 207 crore to Rs 453 crore.

* Tata Infrastructure

What worked for the fund!

Astute ability to pick up trends has worked very well. For example, the fund had cut its exposure to financial services in May 2006 just before the market tanked. The move proved profitable since financial services had lost heavily during this period. The fund manager entered the sector in February 2007 after which financial services sector went up at a scorching pace.

Big bets

L&T, BHEL, Reliance Communications, Reliance Industries, ABB

How it did in downturn

March 2007 quarter was disastrous for the fund as it lost 8.27% compared to the categorys 5.97%. As the March quarter was very dismal for construction sector, funds that were overweight on construction lost heavily. And, Tata Infrastructure had 24% in construction. In the previous fall i.e. in 2006 June quarter, the fund had put up a good show and lost less than the diversified equity categorys 13.6% fall.

Background

In 2006, it was the third best-performing diversified fund. The fund was launched in December 2004. Its AUMs have increased from Rs 767 crore in January 2005 to Rs 2,272.65 crore in October 2007.

* Taurus Discovery Stock

What worked for the fund!

The funds conviction in Jai Prakash Associates and Reliance Capital proved correct. Both the stocks have surged multiple times in a year. While the top holding JP Associates form 20.85% of the funds AUMs, Reliance Capital is closer at 20.26%.

Big bets

Jai Prakash Associates, New Delhi Television, Reliance Capital, SRF, Welspun Gujarat Stahal Rohren, IFCI

How it did in downturn

Benchmark is BSE 200. The fund was not able to protect the downside well, as it fell by 24% in second quarter of 2006 when the benchmark lost 12.10%. In the first quarter of 2007, the fund almost matched the benchmark fall of 6.76%.

Background

An old fund with a high-risk grade. The fund manages a small asset of Rs 32 crore. In July 2006 the funds AUMs had touched a low of Rs 17 crore.

* Taurus Libra Taxshield

What worked for the fund!

The trend is very clear for Libra Taxshield. During the last one year, the funds heavy holding in Reliance Capital paid rich dividends. Noteworthy thing here is that Reliance Capital has been its top holding since 2006. Almost 50% of the funds AUMs are in the financial services sector. The huge run up in this sector has translated into good returns for the fund.

Big bets

Reliance Capital, Infrastructure Development Finance, IFCI, JK Cement, Usha International, Southern Iron and Steel.

How it did in downturn

Benchmark is BSE 200. In the second quarter of 2006 the fund fell 19.26% and the category average fell by 15.35%. In the first quarter of 2007, the funds fall was 7.22%, whereas, the category average was down by 6.45%.

Background

In 2006, the fund was ranked last in its category. When the ELSS category average return was 30% in 2006, the fund lost over 10%. The fund, which was launched in March 1996, manages AUMs of just Rs 7.57 crore.

* UTI Infrastructure

What worked for the fund!

The infrastructure theme has played well for most of the funds in the recent past. Though spread across stocks of different market caps, of late, the fund has developed a bias for large-cap stocks. Despite being a thematic fund, it has a reasonably diversified portfolio of 40-45 stocks. Capital goods, construction and energy dominate the portfolio.

Big bets

Reliance Industries, Larsen and Tubro, BHEL, Bharti Airtel, Reliance Communication.

How it did in downturn

In 2007, despite a few bumps on the road in the first quarter, when real estate and cement corrected sharply, the fund is going great guns. The fund was down by 13.5% in the second quarter of 2006 while in the first quarter of 2007, it lost 9%. In both the market falls, the fund fell more than its benchmark and the equity-diversified category.

Background

The fund, launched in April 2004, is the first infrastructure fund. The fund was the top return generator in 2006.

The author is CEO, Value Research