Sundaram Services Fund continues to comfortably outperform the broad market (S&P BSE500 TRI), delivering over 450 bps alpha in the last 1 year and over 500 bps over last 3 years.
Despite robust outperformance, the fund’s portfolio PE stands at 17 (lower than market), with earnings growth projected at 22% (higher than market), thus offering an attractive PEG of well below 1.
Over a third of the portfolio is invested in the BFSI space, with banks leading the way. Rohit says we are witnessing a great confluence of strong earnings growth visibility for banks coupled with reasonable valuations, making for an attractive investment proposition.
The rest two-thirds is invested in a large variety of domestic services segments including retail, QSR, media, telecom, healthcare and to a lesser extent in global services sectors like IT.
Rohit believes that the industry’s focus on manufacturing and capex oriented stocks has resulted in higher valuations there while domestic services sectors haven’t participated as much despite being strongly linked to domestic economic growth – thus creating a sweet spot for agile investors to effectively harness the wealth creation potential of the services sector through a fund like his.