Date:01/05/2006 URL: http://www.thehindubusinessline.com/2006/05/01/stories/2006050101950400.htm

Back MFs offer more diversification now

Nilanjan Dey

A few funds are uniquely positioned

If you thought that the asset management industry in India has already worked out a fairly wide range of equity products, prepare yourself for facts that may surprise you yet. The mutual fund market is not only growing in size - you have sensed that by now, haven't you? - but also in terms of variety.

Consider some of the funds that have been launched in recent times, and you will have an idea of the diversity that is at work right at this moment.

Yes, a good number of schemes remain me-too in nature, launched by fund houses that are jostling for space. And yet, many of the funds carrying fancy name-tags are simply diversified products that have latched on to specific themes.

But the point is, quite a few funds are uniquely positioned, thanks to the special ways these have been conceived.

Let us try to prepare a short list of these funds, ones that we feel should be considered by investors a bit more seriously. We are, mind you, not referring to the biggies here; the talk-of-the-town, asset-heavy or top-performing funds are not our concern right now. Nor is this list `comprehensive' in any form. What we really want to discuss are a few stand-alone products, each selected for specific characteristics.

So, here's our inventory: LIC MF Sensex Advantage Fund, JM Basic, Can D'Mat, Franklin India Index Tax Fund, HDFC Index Sensex Plus, Reliance Media & Entertainment Fund and Principal Global Advantage Fund. Even a casual observer would be able to sense how singular each of these schemes is.

Take, for instance, the fund managed by Principal MF. This has actually allowed unit holders to buy little bits of Atlas Copco of Sweden, Nestle of Switzerland and Denso of Japan. A good opportunity to diversify and lessen single country risk, you would argue. True, but it is quite another matter that the fund has provided not more than a modest 25 per cent in the past one year.

Consider also Reliance Media & Entertainment, possibly the only fund with a mandate of this nature. But at the end of the day, it remains a broad-based play (one-year return: 85 per cent) that has invested in miscellaneous technology and services companies.

And check out the triumvirate - HDFC Index Sensex Plus, LIC Sensex Advantage and Franklin India Index Tax Fund. Now, the first two are not too dissimilar. The LIC MF scheme aims at generating returns by investing 90 per cent or so in stocks comprising the Sensitive Index, leaving the rest for stocks that are not part of it. The same principle holds good for the HDFC MF product.

The one-year performance of the two funds, nevertheless, is quite dissimilar: the former has delivered 64 per cent, while the latter has done better with 83 per cent. Franklin India Index Tax Fund, however, is a completely different ball game. It is a tax savings scheme (ELSS in official lingo) that is run as an index fund tracking the Nifty.

JM Basic, last but not the least, is a now dedicated to the energy sector. The fund, once committed chiefly to oil stocks, has recently broadened its perspective. Investors may be intrigued to know that the fund's top three holdings are Bharat Bijlee, Suzlon Energy and Emco - not the ONGCs or the Reliances of the world.