Here are some sectoral funds that could benefit from the Budget. It must be noted that the case for such funds is never very strong. The idea of fund investment is that a fund manager should decide which sectors are in and which out. This Budget is short on sector-specific measures, except for infrastructure-related sectors
POWER
Increased allocation to power development marks the sector as a beneficiary
Reliance Diversified Power
The fund was conceived way back in 2004 in the hope of power sector reforms. Though the reforms never took place, the fund did not disappoint. For the past five years, the fund has had an annualized return of 46.31%, while in the recent bull run (9 March-30 June), it turned in a whopping 76.52% return.
As was the case with all other equity funds, 2008 has been a poor year for the fund, to say the least. It was down by -50.39%.
Also See Reliance Diversified Power (PDF)
As the name suggests, the fund has historically invested more in power sector-related companies such as Siemens; Crompton Greaves in production of power generation equipment; and Reliance Infrastructure, Areva T&D in power generation and distribution. But at times, the fund manager has expanded its focus to bet on non-power or infra-related stocks such as banking (ICICI Bank) in order to take advantage of the opportunities in infrastructure financing.
The fund manager maintains a focused portfolio for tracking the power theme. Its average portfolio size has been 18, though of late, with more companies in the sector getting listed, the portfolio size has also gone up (as of 31 May, the size was 27).
OIL AND NATURAL GAS
Enhanced and rationalized tax benefits for the oil and natural gas sector will benefit a large chunk of this fund’s portfolio
IDFC Imperial Equity
One of the top funds in the equity diversified space in 2008, it managed to pull through last year with just a 42% fall while the category and benchmark were down by 55% and 56%, respectively.
Though the fund managed to do well in tough times, it does not particularly shine during good times. It has been able to beat the category average in only one of the five quarters during which the category was yielding positive returns. This could be because of its distinct large-cap bias, which holds back its returns when the mid-caps start rallying. Currently, the fund is betting heavily on the oil and natural gas segment. Its last three-month average exposure to the oil and gas sector has been 24.09% of the total portfolio, while as of 31 May, exposure was further hiked to 26%. Among companies, currently Reliance Industries (7.01%), Gail (4.50%), ONGC (5.26%) and IOCL (4.08%) dominate the oil and natural gas portfolio of the fund.
Also See IDFC Imperial Equity (PDF)
Traditionally maintaining a compact portfolio of around 26 stocks, it has been on the conservative side. But with its bias towards one sector, the fund manager is looking to reverse its record in the bull market.
PHARMA