Wednesday, June 9, 2010


50% infra play, 50% PSU play

Birla Sun life Mutual Fund has launched India Reforms Fund which would primarily invest in companies expected to benefit from Reforms initiated by Govt. The scheme will invest across sectors without any market cap or sectoral bias; i.e., a mix of midcap and large-cap opportunities.

Since Reforms are actively interlinked with infrastructure growth, the Fund would act as a proxy to infrastructure play too. Only that this Fund would have more sectors than infrastructure fund would have. Ex: Infrastructure Funds do not buy Fertilizer stocks, this Birla sun life India Reforms Fund would.
Thus, this Fund is a 50% Infra proxy.
Since Reforms make maximum impact on PSUs and mostly initiated by PSU divestments, this Birla Sun life India Reforms Fund would also act as a proxy to PSU play too.
Thus, this Fund is a 50% PSU proxy.

The reform story is a slow process which will take quite a long time to show results. Thus, this Fund is for investors who are willing to wait for the fruits.

The Fund is managed by Ankit Sancheti who has a good tract record in managing Birla Sunlife Divident Yield Plus Fund and Birla Sunlife Basic Industries Fund.

Though on the face of it, the Fund looks attractive, it should be noted it is always better to invest in a Diversified Fund which would reduce volatility and risk associated with a Thematic Fund like the Birla Sun life India Reforms Fund.

Moreover, it is no secret that a Fund Manager of a Diversified Fund would look at Reforms stocks too, if they look attractive, so a Diversified would always be a better option than a pure thematic fund like Birla sunlife India Reforms Fund because a downturn  or negative news on reforms would be harsh on stocks associated with reforms and thus funds like these would fall the hardest.

Those who are brave enough to ride out the volatility associated with a Theme Fund and bullish on “Reforms” as a story, can look at the fund, preferably through SIPs.

Best of luck,
Srikanth Matrubai

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