Alliance Basic Industries: Invest

Recommendation: Invest

Aarati Krishnan

INVESTING in the Alliance Basic Industries Fund at current levels could be a good option for investors with a two- to three-year perspective.

Investors with a high exposures in technology stocks may consider allocating part of their portfolio to this fund as a diversification measure.

Though its NAV also hovers below Rs. 10 per unit, the Alliance Basic Industries Fund has done better than the three funds that are part of the Alliance Sector Select Series, launched in January 2000.

Though basic and core sector industry stocks have been poor performers over the past eight months, Alliance Mutual Fund has managed to pick up some of the better stocks in the investment universe for the Basic Industries Fund. Banks/FIs, capital goods and automobiles are three dominant sector exposures in the Basic Industries Fund. Over the past three months, the fund has managed to outperform the BL Sectoral Indices comfortably.

Sectoral shifts: Banks/financial institutions continue to be the largest sectoral allocation by end of July 2000, at 29.1 per cent. But the relative weight in this sector is sharply down from the previous month, when it was 40.5 per cent. Capital goods (from 18.3 to 22.5 per cent) and automobiles (from 8 to 8.9 per cent) are two sectors to which the fund has substantially increased weights over the past month.

Changes in top holdings: Apart from the addition of ABB and the exclusion of HDFC, the top ten holdings of the Basic Industries Fund have not changed over the month. Hero Honda, Cummins and Larsen & Toubro have seen a substantial increase in their relative weightages over the month of July.

Facts: The sector-specific funds from Alliance Mutual Fund -- Alliance Buy India Fund, Alliance Basic Industries Fund and Alliance New Millennium Fund -- have been unimpressive performers since their launch, with the current net asset values (NAVs) of all three funds hovering below par. The unimpressive absolute performance can be traced partly to timing; there has been broadbased decline in equity market levels since the launch of the schemes. The current NAV of the Basic Industries Fund hovers at Rs. 8.59 per unit.

This column tracks recent changes in the top exposures of various mutual funds. The latest available portfolio is compared with that of the preceding month/quarter.