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Tata Equity PE Fund: Fund review

In the past six months, the scheme has invested in firms which have sound business model but are trading at cheap valuation.

, ET Bureau|
Last Updated: Jul 30, 2019, 10.23 AM IST
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When there is high pessimism in markets, one can either stay put or shift a part of the investments into schemes that follow value investing. The key to this approach is spotting companies that are either attractive in comparison with historical valuation or with respect to their peers.

It makes sense to be with such firms since in the long-term, they tend do well as the Street recognises the merits of having positive financial ratios in their favour. One of the schemes, which follows this strategy, is Tata Equity PE. The scheme follows an effective strategy of investing in stocks which trade (trailing) cheaper than the valuation of the Sensex at the time of entry.

Close to 70 per cent of the scheme’s portfolio is constructed based on this criterion. This is one of the reasons why the scheme has been a consistent performer in almost all market cycles. This is more evident especially in the long-term cycles of markets.

The scheme has given 12 per cent and 14.5 per cent returns in the past 5-, and 10-year periods, respectively, while its peers in the category have given 9 per cent and 13 per cent returns, respectively, over the same periods.

In the past six months, the scheme has invested in firms which have sound business model but are trading at cheap valuation. They are available at cheap valuation not because of lack of growth in earnings but largely due to broad pessimistic sentiment in the market. A few of these companies are Maruti Suzuki, Zee Entertainment Enterprises and Jubilant Foodworks.

Portfolio change (past 6 months)
New Entrants Complete Exits Increase in Allocation
Ashok Leyland JM Financial MRF
Exide Industries Coal India ICICI Bank
Zee Entertainment Enterprises GAIL (India) HDFC Bank

Returns (in %)
Period CAGR Return SIP CAGR Return Equity Value Fund
-AVG Annualised return (%)
1 Year -7.77 -5.42 -6.75
3 Year 9.96 2.14 6.50
5 Year 11.83 8.87 9.81

Returns peer comparison (in %)
Scheme Name 1-Year 3-Year 5-Year
Invesco India Contra Fund -5.17 11.13 12.70
Kotak India EQ Contra Fund -0.97 11.24 10.34
L&T India Value Fund -4.71 7.71 12.76
Source: Accord Fintech, Compiled by ETIG Database

Expert Take
Amit Singh, CEO, Investica
The strategy this fund follows is to invest in stocks that have a rolling 12-month P/E less than that of the Sensex. Such a strategy is especially useful during rising markets. With this investment objective, the fund has managed to beat the benchmark as well as category if we look at 5-year, 7-year or 10-year performance.
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