Summary

Type	Close-ended Equity: Diversified	Benchmark	BSE 200
Min. Investment	Rs 5,000	Face Value	Rs 10
Entry Load	Nil	Exit Load	Nil*
Issue Opens	November 24, 2006	Issue Closes	December 22, 2006
* In case of premature withdrawal, proportionate unamortised issue expenses will be recovered from exiting unitholders.

Investment Objective*

To provide investors with opportunities for long term growth in capital through an active management of investments in a diversified basket of equity stocks focusing on all four regions of India and in debt and money market instruments. *Source: Offer document

Is this fund for you?

SBI [Get Quote] One India Fund (SOIF) is a 3-Yr close-ended diversified equity fund, which intends to capitalise on the growth opportunities offered by the Indian economy. However the fund has adopted a rather unique approach i.e. divide the country into 4 regions (north, south, east and west) and then invest in attractive stocks from each region. Hence the region becomes the mainstay for picking stocks, rather than conventional parameters like market capitalisation or sectors, among others. SOIF will operate on the rationale that each region throws up attractive investment opportunities, which the fund can benefit from. At Personalfn, we are rather confounded by SOIF's investment proposition. If the intention is to benefit from growth opportunities offered by the Indian economy, why restrict the fund manager's hand by imposing restrictions in the form of regional allocations. Wouldn't a free-flowing investment style better suit the fund? The fund house has indicated that the allocations to each region would vary from 15% to 55%. Theoretically speaking, in the event of any region not offering attractive investment opportunities, the mandate to invest at least 15% would prove to be a constraint. And disregarding the same would amount to contravening the fund's very core offering; in effect, SOIF could end up looking like any conventional close-ended diversified equity fund which invests in an unrestricted manner. A company can qualify as a candidate for SOIF's portfolio based on several parameters like the location of its registered office and manufacturing facility among others. So a company like Tata Steel [Get Quote] can qualify for an investment from both the Western region (because its registered office is located in Mumbai) and the Eastern region (because its manufacturing facility is based in Jamshedpur). With an investment rationale like this, SOIF is free to invest in just about any company and allocate it to any region. This brings into question the basis of the NFO - why have a region-wise selection parameter when any company can qualify as an investment from any region because of multiple offices/manufacturing facilities? We believe SOIF can add little value to investors' portfolios and that it fails to come across as a "must-have" investment proposition. In light of the same, we recommend that investors do not invest in SOIF. Instead, they can consider adding to their portfolios, open-ended diversified equity funds like HDFC [Get Quote] TOP 200 and DSP ML Opportunities, to name a few. These funds are proven performers (across market phases) and have impressive track records to show for.

Portfolio Strategy

The indicated minimum and maximum regional allocations are 15% and 55% of equity assets. However, it has also been mentioned that the allocations are indicative in nature and not absolute, and that they can vary substantially. Instruments Allocation Range Equities and equity related instruments including derivatives 70%-100% Fixed/Floating rate debt and money market instruments 0%-30% SOIF's equity allocations will vary between 70%-100% of assets, while debt and money market instruments can account for upto 30% of assets. The exposure to derivatives instruments can be upto 50% of the equity portfolio. In terms of stock picks, the fund will invest in stocks across market capitalisations and sectors.

Fund Manager Profile

Sanjay Sinha is the Vice President and Head (Equity & Research) at SBI Funds Management Private Limited. He has done B.A. (Honors) in Economics from University of Delhi and is a Post Graduate from IIM-Kolkata. Before joining SBI Mutual Fund in November 2005, Mr. Sinha was associated with UTI Mutual Fund as a Senior Fund Manager for over 16 years.

Outlook

SOIF is mandated to invest in stocks across market segments and sectors in an unrestricted manner. Theoretically, such a fluid investment style can enable the fund to gain from diverse investment opportunities. Similarly, the mandate to invest in debt instruments can aid the fund counter volatility in equity markets. Finally, the fund's adherence to its stated regional allocations will play an important role in determining its performance. Given the ambiguity on that front, we would like to reserve our comments on the same.

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