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Magnum Equity Fund

Dhirendra Kumar

Magnum Equity Fund (MEF) was the first close-ended equity fund of SBI Mutual Fund. The fund was among the few publicly traded funds even during the great Indian scam in 1992 and traded at ten times its net asset value (NAV). It was converted into an open-ended fund in December 1997. The fund's equity strategy is focused on stocks of companies with a sustainable competitive advantage. In its ten-year history, the fund has paid seven dividends ranging between 8 and 22 per cent, a 1:5 rights at par and a 1:2 bonus. MEF carries a 1.5 per cent entry load while redemption is at NAV.

Performance

In its initial few years, the fund soared to fall again for the next few years in the declining market till 1998. The fund aggressively changed track to overcome its portfolio pitfalls. The timely realignment and consolidation since 1998 helped the revival of the fund from a sleeping and inactive portfolio of large cap, dull stocks and illiquid issues to an aggressive growth portfolio.

This change was achieved by taking big bets on select stocks, thereby propelling the fund's performance. This significantly boosted the fund numbers in calendar 1999 - up 206 per cent and it was the top-ranking fund among diversified equity fund category. The fund retained its momentum gaining another 45 per cent in the first two months of 2000.

However, the fund was hit hard in the market fall driven by collapsing prices of the convegence (telecom, media and infotech) stocks. The fund at its trough in May had lost 64 per cent from a net asset value high of Rs 57.86 on March 7 against a 27 per cent fall in BSE Sensex. However, the fund has recovered smartly with the market in recent weeks. The fund's wild ride was mainly for its aggressive positions in few stocks in select sectors. And not much has changed even now. The top five positions are infotech and telecom stocks accounting for 40 per cent of the portfolio.

Outlook

This is one of the most aggressive and volatile funds among diversified equity funds. It is attractive for long term investors seeking aggressive growth. Given the fund's volatility, a periodic investment is likely to yield superior returns.

Fund Basics
Objective	Size (Rs cr)	NAV:30/6	Exit Price	Entry Price	Total Returns (%)
Growth	169	16.09	16.09	16.33	18.30%
Benchmark Comparisons (%)					23/6/2000
	1M	3M	6M	1Yr	3Yr
Fund	25.4	-42.5	-8.2	87.0	34.0
BSE 30	20.0	-8.2	-3.1	13.6	4.9
BSE 100	21.6	-19.5	-6.3	32.1	10.3
Obj Avg	18.5	-19.2	-7.7	46.1	19.6
Top Holdings (1/6/2000)					Net assets (%)
SSI					10.85
Satyam Computer					9.13
Infosys Tech.					7.78
Shyam Telecom					7.52
Global Tele-Systems					4.60
Telco					3.54
Himachal Futuristic					3.16
Sterlite					3.16
Vikas WSP					3.11
McDowell					2.88
Sectoral Allocation (1/6/2000)					Net assets (%)
Software					35.00
Telecom					15.00
Consumer goods					10.50
Diversified					8.00
Auto					6.00
Media					3.00

Source: Value Research

Fund File

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