Ask ET Mutual Funds: Should I shift from SBI Bluechip to L&T Infrastructure Fund?

I am 26 years old. I have invested around Rs 17,000 in SBI Bluechip Fund, L&T India Value Fund, DSPBR Microcap Fund and Franklin India Pension fund (Rs 1,000). I am thinking of redeeming my SBI MF units (one-year-old) and switching to L&T Infrastructure Fund because the other L&T scheme that I invest in has more or less the same portfolio as SBI. What do you suggest?

--Swagata Mukherjee

It is quite heartening to see that you track the portfolio of a mutual fund scheme. Ideally, while creating a portfolio, one should choose funds with low correlation. However, this is very difficult since the funds declare previous month’s portfolio in the beginning of the month. The portfolio of a scheme is build using largecaps (SBI Blue chip), mid & smallcaps (DSP BR Microcap) and multicap funds (L&T value fund). Usually, multicap fund will consist of 60-70 per cent in largecap stocks and balance in midcap stocks. Hence, overlapping is bound to happen. Even L&T Infrastructure Fund has largecap stocks and midcap stocks. Hence, overlapping cannot be ruled out. Exiting merely on basis of portfolio overlap does not appear to be a sound strategy. Besides, switching of existing units involve cost – 1 per cent (exit load) and short term capital gains tax (15 per cent) on the profit, if any. I think all the funds you have selected are good funds and you can continue investing in them.


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