GEMGAZE

October 2016

Sometimes there is a need to concentrate on one particular area, in order to gain a higher understanding and benefit from the same. Investment in sector funds is the answer. It involves high risk. It is definitely not for the faint-hearted. Returns are also mind-boggling. But investors need to keep an eye on any downward trend in the sectors of their choice and should exit appropriately. Investors who are expecting high returns, but willing to embrace high risk can invest in the sector funds discussed below.

The consistent performance of all five funds in the October 2015 GEMGAZE is reflected in all the funds holding on to their esteemed position of GEM in the October 2016 GEMGAZE.

Canara Robeco Infrastructure Fund Gem

Building on the buoyancy

Canara Robeco Infrastructure Fund is a thematic fund focused on identifying growth-oriented companies within the infrastructure space. The fund, with an AUM of Rs 132 crore, aims at having concentrated holdings with 72.81% of the assets in the top three sectors and a bias towards large market capitalization stocks at 48.2%. With a well-diversified portfolio of stocks in the energy, construction, and services sectors, it employs fundamental analysis with a focus on factors such as the industry structure, the quality of management, sensitivity to economic factors, the financial strength of the company, and the key earnings drivers. The fund benchmarks the performance of its portfolio against the S & P BSE 100 Index. Canara Robeco Infrastructure has been among the better performers in its category. The fund’s one-year return is 14.98% as against the category average return of 11.13%. The expense ratio of the fund is high at 2.74% while the portfolio turnover ratio is as low as 28%. The fund has been managed by Mr. Yogesh Pant since December 2011.

SBI Magnum FMCG Fund Gem

Topper with potential

In the past one year, the Rs 276 crore, Magnum FMCG Fund is perched at the top with 56% of the assets in large caps. The expense ratio is 2.54% and the portfolio turnover ratio is 45%. Braving all odds, the one-year return of the fund is 11.68% as against the category average of 10.3%. Over the three and five year periods, the fund posted 15.72% and 21.58% of CAGR, respectively as against the category average of 15.73% and 20% respectively. Magnum FMCG Fund is benchmarked against the S & P BSE FMCG Index. Most stocks that operate in this space have already moved up because revenue and profit growth for these companies were still better than firms in beleaguered sectors. Despite high valuations, companies in the consumption space still hold strong growth potential, thanks to lack of viable alternatives in the market. FMCG funds are, therefore a good bet.  Saurabh Pant has been managing the fund since June 2011.

ICICI Prudential Banking & Financial Services Fund Gem

An evergreen fund

ICICI Prudential Banking & Financial Services Fund invests predominantly in large and midcap financial companies. 60% of the portfolio consists of large caps. This fund adopts a 'bottom-up' strategy, to identify and pick its investments across market capitalizations. The fund has not only outperformed its benchmark, the S&P BSE Bankex but has also outperformed other banking sector funds. The current AUM of the fund is Rs 1134 crores and the one-year return is 25.05% as against the category average return of 16.39%. The fund is managed by Vinay Sharma since February 2015.

SBI Pharma Fund Gem

Healthy prospects in the long run

SBI Pharma Fund sports an AUM of Rs. 1074 crores. The number of stocks held by the fund in the last few months has hovered around 19. The concentration analysis reveals that the fund has around 50.27% assets allocated towards the top 5 stocks while the top 10 stocks make up around 71.08%.  The one-year return of the fund is -6.67% as against the category average of -7.14%. The three-year and five-year returns of the fund are 26.47% and 27.36% as against the category average of 24.11% and 22.84% respectively. SBI Pharma Fund tops the list of pharma funds across time periods. The outperformance of the fund has been quite consistent. For instance, in the last five years, the scheme’s annual returns have been better than its benchmark almost 84% of the time. The expense ratio of the fund is 2.23% while the portfolio turnover ratio is 32%. A higher large-cap slant (over 55%) should hold the fund in good stead even during volatile times. The fund has been managed by Tanmaya Desai since June 2011.

ICICI Prudential Technology Fund Gem

Appetite for new technologies

Consumers’ appetite for new technologies has been driving growth in the technology sector for years. This is providing good opportunities for technology companies. ICICI Prudential Technology Fund is a Rs 282 crore technology fund, which invests in large technology oriented companies. It invests in companies listed in the BSE Teck. Its portfolio has 58% exposure to large cap companies. The fund seeks to invest in knowledge sectors like IT and IT Enabled Services, Media, Telecommunications, and others. The one-year return of the fund is -9.21% as against the category average of -6.05%. The three-year and five-year returns of the fund are 14.3% and 20.04% as against the category average of 12.33% and 16.01% respectively. The fund is benchmarked against the S& P BSE IT Index. The fund is managed by Mrinal Singh since August 2008.