Investors should take note of JM HI FI fund launched in March 2006. The fund’s objective is to invest in real estate, infrastructure, financial services, and similar sectors. These sectors were the most favoured ones in the last bull-run and gave outstanding returns among various sectors. Due to this, the fund gave more than 100% returns in less than a year in 2007. However, from January 2008 when the market saw a steep fall, infrastructure, financial services, and real estate sectors became the worst performers due to stretched valuation, high interest rates, and mark-to market losses in banks. The BSE real estate and bankex index has given a return of -65% and -52% respectively since the January 2008 high. The fund’s investment momentum stocks such as IDFC, Jai Corp, Unitech, and Parsvnath Developers resulted in a decline.
The fund exposure to interest rate and commodities-sensitive sectors gave a negative return of 52.69% in the last six months in the diversified category. On the other hand the Sensex gave a negative return of 35%. Due to a steep decline in the net asset value, the passive or long-term mutual fund holder is yet to get positive returns from the fund since its launch. The fund has been very volatile with a high of Rs 19 and low of Rs 7.5.
One of the reasons for the underperformance is that the fund has not shifted or increased the exposure in value sectors like FMCG and pharmaceuticals, being the least underperformed ones. Also, a portfolio turnover ratio of 64% is at a high level considering the small asset size of just Rs 22 crore. If one looks at technical parameters, standard deviation is high at 4.1 and denotes high volatility. The current market being very volatile and a lot of negative news flowing related to the banking and real estate sector, one should stay away for some time and wait till the atmosphere is clear. One should go for SIP and closely monitor the portfolio at regular intervals. The fund is handled by Sandeep Neema and entails a minimum investment of Rs 5,000.