Books
Columnists
Indian Tax
Insurance
Interview
Lifestyle
Mutual Funds
NRI Tax
Personal Finance
Personal Banking
Real Estate
Stocks
Travel

SBI Mutual Fund running out of steam

Aabhas Pandya

SBI Mutual Fund has suddenly lost momentum. The carnage at the bourses has inflicted a heavy damage on the asset management company's (AMC) star funds with more than 50 per cent erosion in net asset values.

After having delivered superlative returns in the last one year, it has been an ominous three months for SBI Mutual's equity and balanced funds. The growth funds from the asset management company have slipped to the bottom of the heap for the three-month period ended May 26, 2000.

For instance, the flagship equity fund, Magnum Multiplier Plus, has lost a whopping 60.58 per cent in the last three months with its net asset value declining from Rs 50.65 on February 25 to Rs 19.96 as on May 26. The NAVs are adjusted for bonus and dividend. The fund lost 39 per cent in April alone and its size shrunk from Rs 7.95 billion to Rs 4.86 billion. The fund ranks last among the list of 43 diversified equity funds for the three-month period ended May 26.

The open-end equity tax planner, Magnum Taxgain, has also lost 61.54 per cent in the recent meltdown against a 41 per cent decline in the sectoral average. The fund also ranks last among 12 open-end equity-linked tax-savers for the three-month period.

Among other equity funds from SBIMF are Magnum Information Technology and Magnum Equity, which have lost 56 per cent and 59 per cent, respectively.

Even the AMC's balanced fund, Magnum Balanced Fund, has seen a 48 per cent decline in the NAV against a 27 per cent decline in the sectoral average. The fund has also sunk to the bottom among the 20 open-end balanced funds.

The equity funds of SBI Mutual Fund were among the top ten, while the balanced and tax planning funds were ranked first for the one-year ended March 31, 2000. Concentrated portfolios, heavily skewed in favour of ICE (Information technology, communication and entertainment) stocks, drove the stellar performance of these funds last year. For instance, Magnum Multiplier Plus had over 50 per cent of its corpus invested in just four scrips: Software Solutions, Ramco Systems, Himachal Futuristic and Zee Telefilms. Same is the case for Magnum Equity, where four stocks account for a whopping 42 per cent of the total portfolio. So, when the markets dropped, the absence of diversification coupled with concentrated holdings in the ICE sector accelerated the fall. The SBI equity funds also have a reasonable exposure to small and mid-cap infotech stocks, where the fall was much sharper than front-rung IT stocks. This pulled down the NAVs at a greater pace.

The AMC is also faced with another piquant situation: it has as many as three diversified equity funds but they are not governed by different investment philosophies. These funds have picked up more or less the same stocks with varying weightage.

To top it, the AMC also has an information technology fund. The AMC's balanced fund is also heavily invested in equities (around 80 per cent on April 1) with around 36 per cent in ICE stocks.

Funds	Closing NAV (in Rs on May 26)	3-month return (%)
Magnum Equity	13.00	-58.90
Magnum Global	10.22	-56.71
Magnum Multiplier Plus	16.52	-60.58
Magnum Contra	8.05	-33.08
Magnum FMCG	8.13	-34.17
Magnum IT	12.46	-55.69
Magnum Pharma	8.63	-32.21
Magnum Taxgain	21.85	-61.55
Magnum Balanced	13.68	-48.28

Source: Value Research

Fund News

Tell us what you think of this news