Tata Equity P/E Fund: Outperformer in rallying markets

November 24
02:16 2017

Launched in June 2004, Tata Equity P/E Fund is classified under the diversified equity funds category of CRISIL Mutual Fund Ranking. It has featured in the top 30 percentile (CRISIL Fund Rank 1 or 2) in the past six consecutive quarters ended September 2017. The fund’s month-end assets under management (AUM) increased close to four times in the past three years to Rs 2,067 crore in October 2017.

The fund’s investment objective is to provide reasonable and regular income and/or possible capital appreciation. It is currently managed by Sonam Udasi.


The fund has generated considerable alpha over its category (funds ranked under the diversified category in September 2017 CRISIL Mutual Fund Ranking) and its benchmark (S&P BSE Sensex) across the trailing periods under analysis.

The fund’s performance has been a mixed bag across the market phases under analysis. It has outperformed its category and the benchmark in bull market phases, particularly. However, it has underperformed its category in bear phases. The fund has significantly outperformed its category in the recent market rally (March 2016 to November 2017) registering 43.17 per cent annualised returns compared with 31.78 per cent by peers and 24.13 per cent by the benchmark.

An investment of Rs 1,000 in the fund on June 29, 2004 (its inception) would have returned Rs 13,480 on November 17, 2017 at an annualised rate of 21.43 per cent, surpassing the category and the benchmark comfortably which would have returned Rs 11,535 (20.03 per cent) and Rs 6,887 (15.50 per cent), respectively.

The systematic investment plan (SIP) route offers investors an opportunity to invest in a disciplined manner at regular intervals which is beneficial in volatile markets. Investors investing monthly through this mode in Tata Equity P/E Fund have registered substantial gains over the benchmark in the past one-, three- and five-year trailing periods.

Portfolio analysis

Banks (13.87 per cent), finance (10.81 per cent), software (7.62 per cent), power (7.04 per cent) and automobile (6.21 per cent) were the top sectors (by exposure) over the past three years, comprising about half of the fund’s portfolio. In terms of contribution, the key sectors were finance, gas, banks, power and textile products.

Exposure to banks was majorly into YES Bank and ICICI Bank. However, the exposure to this sector was trimmed to almost half from 21.86 per cent in November 2014 to 11.35 per cent as of October 2017. Notably, YES Bank and City Union Bank stocks delivered stellar returns, more than doubling during their respective holding periods. The fund’s call to exit Axis Bank fifteen months ago boded well for the fund as the stock fell 4.21 per cent during this period.

Finance sector saw its exposure more than doubling over the past three years to 11.26 per cent as of October 2017. Top performers within this sector were Bajaj Finserv and Muthoot Finance.

Over the past year, the fund significantly reduced exposure to the software sector (10.76 per cent in November 2016 to 1.59 per cent in October 2017), which proved to be a favourable judgment. The sector (represented by S&P BSE Information Technology returned 3.28 per cent) significantly underperformed the broader market (Nifty 50 returned 19.76 per cent) during this period.

Although auto featured among the top sectors, the fund manager exited the auto sector for a brief period from June 2016 and re-entered in November 2016. Since then, exposure to this sector has more than tripled to 13.56 per cent in October 2017. GAIL and Indraprashta Gas were the top performers belonging to the gas sector. Other top contributors to the fund’s performance were Finolex Cables, PowerGrid, Bharat Electronics, Strides Shasun and KPR Mill.

Overall, the fund took exposure to 128 stocks across 33 sectors in the past three years. It held about 43 stocks, on average, in its portfolio, of which only two were held consistently. YES Bank and Finolex Cables were the consistently held stocks and both more than doubled in three years.

CRISIL Research

Related Articles