ver the last six months, we have been surprised to look at some of the good performers in the diversified equity mutual fund category.
Diversified equity funds are those that invest in the shares of various companies of different sectors. However, not many of them stuck to this philosophy.
Here's what we found about top six monthly gainers as on March 23, 2005.
1. Taurus Discovery Stock
What you must know: This fund depends excessively on one or two stocks. Its fortune has, therefore, fluctuated according to the movement of these stocks.
In March 2000, Himachal Futuristic alone accounted for 32.49% of the portfolio (total investments of the fund). A dangerous position to be in. But this fund does not learn from its past mistakes.
Since September 2003, the fund has invested around 20% of its portfolio in Jaiprakash Associates (earlier Jaiprakash Industries).
More recently, the fund has been reaping the benefits of its investments in NDTV, when it was an unlisted stock (not yet listed on the stock exchange). As per the March-end portfolio, NDTV accounted for as much as 26.24% of its portfolio.
2. Taurus Starshare
What you must know: The fund has been managed on the lines of Taurus Discovery Stock.
In March 2000, 30.85% was invested in Himachal Futuristic alone.
Like Taurus Discovery Stock, the fund has invested disproportionate amounts of its investments in Jaiprakash Associates in recent times. In March 2005, the stock accounted for 28% of the portfolio.
3. Canexpo
What you must know: The fund focuses too much on a few sectors.
When it comes to investing in Infosys, this fund beat many of the technology funds during the tech boom of 2000.
In January 2000, Infosys accounted for 28.3% of the portfolio, while the tech sector as a whole had an allocation of 64.39%. It rose to 71.74% by March 2000.
In the recent past, though, the fund has not been taking excessive exposure to any particular stock, but it has been guilty of a high degree of sectoral concentration (investing in one particular sector).
For most of 2004, the fund has invested in excess of 30% in the health care sector.
Since January 2005, the fund has shown a great affinity to metals (30.85% in March).
4. Magnum Global
What you must know: Exceptional returns generated during the last few months seem to be a result of good fund management.
After being bitten by the tech bug like many other funds during 2000, the fund has learnt from its past mistakes.
Of late, the fund has been doing quite well, with a portfolio diversified across stocks and sectors.
5. Magnum Contra
What you must know: The fund does not get swayed by popular stocks.
Apart from yielding good returns, another good thing this fund has done is to stick to its objective of investing into 'out of favour' stocks. This objective kept the fund away from technology stocks when prices skyrocketed in 2000.
If you happen to share the philosophy that the best time to invest in an asset is when it is not performing well, this is the fund for you.
What you can learn
Don't just invest in a mutual fund and forget about it.
If you find the fund is too centered on one sector (remember we are talking of diversified equity funds here), and it makes you uncomfortable, consider getting out.
Ditto if you find too much money invested in one stock.
Illustration: Dominic Xavier
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