Alliance Equity: Invest on a staggered basis

Suresh Krishnamurthy

Recommendation: Fresh investments can be considered in Alliance Equity Fund with a medium-term perspective considering its performance track record.

Also, considering the state of the capital markets instead of investing a lump sum, investments can be made on a staggered basis in small lots. The net asset value per unit is Rs 35.13 per unit for the growth option and Rs 25.42 per unit for the dividend option.

Suitability: In the past, Alliance Equity has adopted an aggressive approach to investing in the stock markets. The aggressive approach manifests in the form of higher exposure to the technology sector and also in stock selection. This has implications for the risk involved in an investment in the fund and it has to be considered as being above market average. Investors comfortable with such a risk profile can consider investing in the fund.

For now, investors can opt for the dividend plan. Investors can consider a change over to the growth option after evaluating the changes in the Budget next year regarding taxation of dividends distributed by mutual fund equity schemes.

Performance: The fund has out performed the indices over a longer-time frame. Even compared to peers, the fund would be among the top performing funds. On the performance front, the negative aspect has been the performance of the fund in the April-June quarter during this financial year. Due to excessive exposure to highly volatile stocks, the fund recorded a sharp depreciation in value. However, the fund has made a come back in the next few months. Overall, taking both the bull run and the bearish period together, the fund has still remained among the top performers.

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Portfolio allocation: In terms of sectoral allocation, the top exposures of the fund are information technology, telecom, banks and FIs and healthcare. The top exposures in terms of stocks at the end of October are Infosys Technologies, HFCL, Sterlite Optical, NIIT and Satyam Computers.

In October, the fund has opted to deploy the surplus cash in the market. Consequently, at the end of October, cash position has come down to close to 2.5 per cent from 13.1 per cent at the end of September. The cash deployment has not been made in any particular industry and the investments in the miscellaneous category have increased sharply.

In terms of investment strategy, the fund has mostly remained more or less fully invested. Also, the fund has not been shy of investing in some stocks with poor track record in terms of corporate governance. However, until now, the fund has the performance to show for the risks taken.