Tuesday, December 22, 2009

SUNDARAM PSU OPPORTUNITIES FUND



RELIGARE PSU EQUITY IS A BETTER OPTION

Following the footsteps of the successful fund launch of Religare PSU Equity Fund, Sundaram too has joined the PSU bandwagon and has launched the Sundaram PSU Opportunities Fund, which seeks to invest in PSU companies across the market cap and sectors.
The fund has identified wealth creation triggers in the form of disinvestment process, growth, valuation re-rating and high-dividend payouts. Sundaram PSU fund will overlap its other Funds like the Energy Fund and Financial Opportunities Fund.

The Sundaram PSU Opportunities Fund was launched on November 25 and is schuduled to close on December 24, 2009.

As usual, the minimum lumpsum investment is Rs.5000, but, as with every Sundaram Scheme, this Fund's Minimum SIP instalment amount is Rs.250/-.

INVESTMENT ANALYSIS :
1)With a Stable Govt in place, one can expect quite a huge disinvestment programme which should keep the PSU stocks in limelight and this fund along with Religare PSU Equity Fund will be in good position to capture any upside.

2)Most PSUs are BIG companies and are Leaders in their industries, in fact, many are virtual Monopolies. Thus this Fund will be like a Large Cap Fund. This Fund will is recommended for Long Term Investors.
3)In the Last Year's Big Bear Crash, PSUs were the Least Affected thus giving a sort of comfort to investors.
4) PSUs are trading at a average discount of 40% discount to the Private Sector, even a 50% re-rating would immensely boost the stock prices of the PSUs and thus, the Sundaram PSU Opportunities Fund too.

Negatives :
1) The Fund is a thematic fund catering to the limited universe of public sector companies.


WHY RELIGARE SCORES OVER SUNDARAM :
While most analysts would blindly recommend Sundaram PSU Fund over Religare PSU Fund., I would take a contra view and say AVOID SUNDARAM PSU FUND AND INVEST IN RELIGARE PSU EQUITY FUND.
Here are the key reasons for the same :
1. Equities Outside PSUs :
While Sundaram has the mandate to invest upto 35% outside the PSU basket, Religare does not. While this may ensure diversification, this also means that the PSU THEME IS DILUTED IN SUNDARAM PSU FUND.
2. Overseas Investments :
Sundaram again can invest upto 35% in Overseas which is laughable considering that this is a Public Sector Fund. Religare will be 100% investing in India which ensures NO CURRENCY RISK, NO COUNTRY RISK, NO GEO-POLITICAL RISK.
3. Exposure to Banks in Benchmark :
Sundaram has CNX PSE as its Benchmark which has NIL Exposure to Banks, where as Religare has BSE PSU as its Benchmark which has around 20% exposure to Banks. It is shocking how Sundaram tripped on this. BANKING AS A SECTOR IS IGNORED IN SUNDARAM PSU FUND.

SPECIAL TIP
Religare has already invested its Assets. More buying in the PSU Stocks by the new Funds like Sundaram PSU Fund and SBI PSU Fund (which is in the process of being launched) will benefit Religare PSU Equity Fund which is already fully invested. The Scope for Value Unlocking of Public Sector Undertakings is huge and Religare and Sundaram both are poised to take advantage of these.

If you are convinced about the PSU story, then you know which fund is a better proxy to play on the theme.

Best of luck,
Srikanth

Also visit

http://equityadvise.blogspot.com

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