Should you invest in SBI Blue Chip?

Another New Fund Offering on the block.

This time around it is SBI Mutual Fund with SBI Blue Chip Fund.

The fund will be initially available for subscription from December 23, 2005 to January 20, 2006 and will reopen for continuous sale and repurchase from February 17, 2006.

You can invest with a minimum of Rs 5,000 and further investments in multiples of Rs 1,000. 

Where the money will be invested

The fund would invest 70% to 100% of its assets in equities, the balance (30% to 0%) will be in debt and money market instruments.

The fund will only select stocks whose market capitalisation is equal to or more than the least market capitalised stock of the BSE 100 index. Some of the characteristics of the stocks selected would be:

• Large companies with an established business presence,
• Good reputation
• Possible market leaders in their industry/sector
• Less uncertainty in topline/ bottom line growth
• Normally have a history of successful growth, high visibility and reach, good credit ratings
• Excellent brand equity amongst the general public
• Widespread interest amongst investing public.

The load

One-time investment

The entry load is nil.

There is an exit load though. If you invest now and exit within six months from the date of reopening of the scheme, you pay a hefty 2.25%. After six months but less than 12 months after the date of reopening of the scheme, you pay just 1%.

If you invest later, not during the offer period but when it opens for subscription, you pay an entry load of 2.25% but no exit load.

So if you want to pay nothing, you invest now and sell your units only after one year of the scheme reopening.

Systematic Investment Plan

If you invest within the offer period, you pay no entry load. But, you pay an exit load of 2.25% if you exit within a year of each installment; 1% for exit after a year but within two years of investment.

If you invest after the offer period, you end up paying 2.25%. The exit load would be 1% within a year from the date of investment of each installment.

The fund manager

Sanjay Sinha, Head of Equity, SBI Mutual Fund, is an IIM-Calcutta alumnus, with over a decade and a half of experience in the mutual funds industry. He was formerly with UTI Mutual Fund

Should you?

Since it is a new fund offering, only time will tell how successful it is.

If you are looking for mutual funds that invest in large cap firms and blue chip companies, then you could also consider DSPML Top 100 Equity, Franklin India Bluechip, Birla Top 100 and HDFC Top 200.

HDFC Top 200 and Franklin India Bluechip are the two large-cap funds that have delivered good returns over a long period of time.

Besides the above two, there is another you can consider - DSPML Top 100 Equity. Though relatively new, it has done reasonably well since its launch in 2003.

Most of the other equity funds are blends. They may move across market capitalisation depending upon their outlook.

Birla Top 100 is relatively very new and was launched just four months ago in September 2005.

Here is a quick snapshot of the funds.
 

Data is as on January 11, 2006 and supplied by Value Research.