Kothari Bluechip: Focus on large-cap stocks

Suresh Krishnamurthy

Recommendation: Fresh investments in Kothari Pioneer Bluechip can be considered with a term perspective of close to three years. The performance of the fund since end-February 2000 has been impressive compared to other diversified funds under-performing the Nifty by only around four percentage points. The strategy followed by the fund appears to hold the potential to deliver attractive returns over the medium-term.

Suitability: The fund is suitable for investors with an appetite for market-average risk. The investment strategy, portfolio allocation and stock selection all appear to have been made with a view to balance the risk as well as maintaining a degree of upside potential.

Investors can opt for the dividend option. Re-evaluation of the option can be made after considering the changes in next year's Budget regarding taxation of dividends distributed by equity schemes.

Investment strategy: The fund has consistently strived to maintain a diversified sectoral allocation profile. In February, despite a consistent increase in IT stock prices, the fund pared down its exposure to the IT sector. Also, post-April, the fund once again increased exposure to the IT sector buying into Infosys and HCL Technologies. These moves have helped the fund post a decent performance since February this year compared to its peers.

In its latest performance report, the fund says that it would maintain a 40 per cent exposure to the IT/Media sector and 30 per cent in pharmaceutical and FMCG stocks. The higher allocation to the IT sector compared to their weightage in Sensex and Nifty appears reasonable considering the prospects for the sector.

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Portfolio allocation: The top five stocks in the portfolio are Satyam Computer, NIIT, Infosys, ITC and HCL Technologies. The top ten stocks in the portfolio account for close to 60 per cent of the net assets. Again, while the fund is not excessively focussed, it is also not entirely completely diversified either. Also, compared to the indices, the weightage allocated to the stocks of Infosys and HLL are quite low. Sectorally, the top five exposures are IT, FMCG, Healthcare, Electric Equipment and Diversified.

Background: The fund has delivered a return of close to 30 per cent since its launch in December 1993. The fund manager is Mr. K.N. Siva Subramaniam. The fund levies an entry load of two per cent while there is no exit load. The net asset value per unit of the growth option is Rs. 23.67 and the dividend option is Rs. 18.32.