Is Baroda Sector Focus Fund a diversified scheme?

Despite its moniker, the fund may do better by switching between sectors. But that makes it an equity diversified fund

Baroda Pioneer Mutual Fund has filed its draft offer document with the Securities and Exchange Board of India (SEBI) to launch an open-ended 'Baroda Pioneer Sector Focus Fund'. The scheme will be benchmarked against the S&P CNX Nifty.
The fund will have exposure to six sectors with 25% of net assets to each sector at any given point of time depending upon their growth prospects and valuation. The scheme has provided an indicative list of 15 sectors which it may invest in.

These sectors include automobiles, cement & cement products, construction, consumer goods, energy, financial services, industrial manufacturing, industrial capital goods, information technology, media & entertainment, metals, pharma, services, textiles and telecom. Baroda Mutual Fund manages a corpus of Rs3,954 crore as on July 2010 and has 15 schemes in its basket.

Is it worth investing in this fund? Unfortunately, sector funds are not a good idea. They are launched when a particular sector is doing well, which is when prices have already run up. The subsequent stock price performance is usually lacklustre. We analysed the performance of 49 equity sector funds. Over a one-year period, 40 funds have outperformed their respective benchmarks while only 9 have lagged behind.

However, over a three-year period, only 23 funds outperformed their benchmarks while 26 funds failed to outperform their respective benchmarks. The Baroda Pioneer Sector Focus Fund may do better than others because it will able to switch between six sectors. But then, that makes it a diversified equity growth fund!

Equity funds witness outflows of Rs 3,400 cr in July

Equity schemes witnessed net outflows of Rs 3,400 crore in July, highest in the last 12 months. With distributors shying away from selling mutual funds and retail investors redeeming in the rising equity markets, it has become difficult for the asset management companies (AMC) to attract new investors.
Sundeep Sikka, CEO of Reliance Mutual Fund says, "Historically, surging markets have led to redemptions. And today investors are wary of making lump-sum investments." In the month of July, equity markets were up by 2%. While the equity schemes witnessed net redemption's in the month of July, the mutual fund industry on an overall basis witnessed inflows of over Rs 31,600 with most money flowing into money market schemes.
According to the data provided by the Association if Mutual Funds in India (Amfi), income schemes saw net inflows of Rs 475 crore while it was Rs 34,300 for money market schemes. For the same period, balanced and ELSS schemes saw outflows of Rs 43 and 139 crore, respectively. Among other category of funds, exchange traded funds including gold and other witnessed inflows of Rs 530 crore while fund of funds investing overseas saw redemption of Rs 112 crore.
Ever since the market regulator scrapped entry load in August last year, equity schemes has seen net redemption's of over Rs 11,500 crore. Money has flowed into equity schemes in only three out of twelve months.
Sikka adds that it is encouraging to find that SIP (Systematic Investment Plan) investments are continuing even in this volatile market. In July, average assets under management of the fund industry stood at over Rs 6.65 lakh crore down by 1.52% against Rs 6.75 lakh crore in June.

Change in mutual fund fee structure
Securities and Exchange Board of India (Sebi) has asked mutual fund houses to provide investors an exit option before increasing administrative fees in a fund of fund (FoF) scheme. Fund of fund schemes are those where a mutual fund invests in a scheme of another MF.
In a July 29 notification sebi said that the total expense charged from investors in the scheme should not exceed 0.75 % of either the daily or weekly average net assets.

Outstanding investments in India notch up Rs 100 lakh crore milestone

Outstanding investments in India crossed the Rs 100 lakh crore mark in the March 2010 quarter.
CMIE's CapEx database reveals that Indian corporates continue to announce fresh projects, even after commissioning huge capacities in the last few years. Projects worth Rs 6.5 lakh crore are scheduled for commissioning in 2010-11. This figure stood at Rs 2.3 lakh crore in 2007-08, Rs 2.9 lakh crore in 2008-09, and Rs 4 lakh crore in 2009-10.
The current investment boom is not triggered by any big push from the government. The chief growth driver is increasing demand, impelled by a sharp rise in corporate wages, salaries of government employees, and income of the farming community. The continuous flow of fresh investment announcements reflects the confidence of Corporate India that this growth in demand is sustainable.
The corporates are unlikely to face any problems in funding these projects, because there has been a handsome growth in domestic savings in the last eight years. Gross domestic savings as a proportion of GDP went up steadily from 23.5 per cent in 2001-02 to 36.4 per cent in 2007-08.
The Indian economy is expected to return to its nine per cent growth trajectory after a two-year blip. We expect the real GDP to grow by 9.2 per cent in 2010-11, as compared to an estimated 7.1 per cent in 2009-10. All three broad sectors of the economy are projected to do well. The industrial sector is projected to grow by 9.6 per cent, services by 9.8 per cent, and the agriculture and allied sector by 5.8 per cent.
For fiscal 2010-11, inflation as measured by the wholesale price index (WPI) is projected at six per cent, as compared to the 3.6 per cent estimated for fiscal 2009-10.