Suresh Krishnamurthy

INVESTORS in Sundaram Select Midcap can continue to retain their exposures. The fund is following its mandate of investing in mid-cap stocks and its performance since inception has been impressive.

Fresh investments need not be considered for two reasons. The valuation of mid-cap stocks appears stretched and this may not be the right time to enhance exposure to this category of stocks. There are also other competing mid-cap equity funds such as Franklin Prima, which have done well the past two years and have an impressive record over a longer period. It may be better to diversify mid-cap exposures to such funds now.

Sundaram Select Mid-cap is not investing a portion of its assets in large-cap stocks. It is tracking the mid-cap space with a significantly diversified portfolio. If the fund is able to carry forward its performance of the past two years to a longer period, this fund could emerge as one of the premier picks in the mid-cap mutual fund space.

Select Mid-cap vs Prima: Franklin India Prima is one of the premier mid-cap funds available for investors. It has a record of more than ten years. Sundaram's scheme has out-performed Prima in the past 12 months.

The risk profile of Select Midcap has been slightly higher than that of Prima.

In terms of consistency, both have out-performed the BSE-200 in 17 of the 24 months between March 2003 and March 2005. But there is a fundamental difference between Prima and Select Mid-cap in the way their portfolios are structured.

Prima also invests in stocks with market capitalisation between Rs 2,000 crore and Rs 7,000 crore.

For instance, stocks such as Indian Rayon, i-Flex, Patni Computers, GE Shipping and MICO are part of its portfolio.

In contrast, stocks with market capitalisation of over Rs 2,000 crore are seldom part of Select Mid-cap, which is much more diversified.

The top ten stocks constitute 36 per cent of net assets for Prima, while they make up only 18 per cent for Select Midcap.

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