K-MNC: Hold

Recommendation: Hold

Aarati Krishnan

THE fund's high exposures in FMCG and pharmaceutical stocks appear to have contributed to the better performance than the broad market in the last quarter.

Though the fund appears to be passively managed, the portfolio has stocks of quality companies outside the technology sector. Investors may hold on to the fund as a defensive measure.

The FMCG and pharmaceutical companies in this fund's portfolio turned in a healthy earnings performance in the past quarter. The companies in the portfolio appear to hold the potential to deliver steady, though not impressive, earnings growth over a three- to four-year time-frame. Potential for price appreciation appears to exist.

Suitability: Given its portfolio strategy, the fund is suitable only for long-term equity investors with an investment horizon of four to five years, with moderate return expectations. An analysis of the fund's portfolio between June 30 and August 31 reveals the following facts:

*The equity holdings saw little change over the period, with the portfolio remaining largely intact.

*The only stock to exit the portfolio was Castrol, which was sold out in July.

*Reckitt & Colman of India and Citicorp Securities were the only additions during the two-month period.

*Unlike its counterpart Birla MNC Fund, K-MNC has a restricted exposure to technology stocks, instead focussing on FMCG and pharmaceutical stocks. These two sectors were the dominant sectoral exposures over the past quarter. Selective market interest in these stocks appears to have helped the fund's NAV in the past quarter.

*The fund's FMCG allocation went up from 24.58 per cent to 27.22 per cent since June, while allocation to pharma stocks went up from 16.73 per cent to 18 per cent. The sectoral allocations appear to have changed mainly as a result of price appreciation/depreciation in the holdings.

*In June 2000, the fund stated that it planned to restrict technology exposures to 10 per cent of assets. The fund stepped up its exposure to technology stocks from 4.62 per cent in June to 8.24 per cent by August.

*The fund's cash position fell from 31.25 per cent of assets in June to 23.90 per cent by August. The cash appears to have been used mainly to step up allocation to technology stocks.

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.