Morgan Stanley says...: `Valuations are saner now'

S. Vaidya Nathan

MORGAN Stanley Mutual Fund has said this is a testing time for all investors. The market's total capitalisation has more than halved in just a few months.

The fund, however, views the recent fall as a natural correction. From a performance standpoint, it is difficult to sustain the long spell of outperformance of the benchmark indices.

The fund has also said the November 1999-March 2000 period, characterised by unprecedented valuations and extraordinary optimism, seems like a distant memory and expressed doubts whether such a bull market will return anytime soon. At the same time the fund has taken the position that, after reaching a crescendo, the valuations of many stocks are fast returning to saner levels.

As far as its portfolio strategy is concerned the fund has indicated that the one evolved through the year has been to move systematically to a defensive stance. As part of this, it indicated that it started the year by significantly reducing our exposure towards the TMT (technology, media, telecom) sector. The plan was to sell into strength during the heady first quarter and the fund has contrary to its general posture adopted higher levels of cash.

The Portfolio Manager of the Morgan Stanley Growth Fund, Mr Vinod Sethi, has in the latest report to investor stated that ``As a policy, we do not keep cash levels beyond a very basic minimum. However, given the fact that we were going through an extraordinary period, where markets in general faced a hard landing following a dizzying run, we took the unusual step of raising cash levels to, on average, around 8-9 per cent. We would look to put our cash back to work in the Fund during the coming months. Our effort would then shift to identifying the winners of the next cycle, the nature of which is hard to predict.''

The fund also made the following points regarding markets:

Based on past experience, our belief is that leadership usually does not change at the end of a bull market.

If TMT stocks were going to be derated, it was unlikely that other sectors were going to be re-rated.

Confidence for the market as whole was affected when popular stocks fall sharply.

It takes a new bull market for fresh leadership to emerge.

In terms of price destruction, the worst is behind us.

SEBI chairman's view: The Chairman of Securities and Exchange Board of India, Mr D. R. Mehta has expressed the view that mutual funds should penetrate the interiors of the country rather than concentrating their efforts in the metropolitan cities. Private sector mutual funds should think of arrangements wherein investors can access their products even in smaller towns. The launch of new products is required, and funds should concentrate on providing and updating information on their websites.

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AMFI's revamped site: The Association of Mutual Funds in India (AMFI) has revamped its web site, www.amfiindia.com. The revamped site provides the net asset values of all mutual funds -- open-ended and close-ended, including the growth and dividend options. The sale and repurchase prices will also be available on the site.

Dhanavarsha (6) redemption: LIC Mutual Fund has announced that the Board of Trustees of the fund have decided to redeem the income scheme, Dhanavarsha (6). The redemption is to be done prematurely at face value. The date of redemption was November 30. The scheme, launched in late 1995, is due for redemption only in the last quarter of 2001. The fund has a corpus of around Rs 26.75 crores with 90 per cent invested in debt and the rest in equities. The NAV of the fund as of November 22 was Rs 6.90 per unit. The book closure for this purpose was between November 22 and November 30.

Zurich dividend: Zurich India Mutual Fund has declared the 32nd dividend of Rs 1.40 per unit for its Zurich India Liquidity Fund (Savings Plan - Dividend Option). The dividend is payable to investors in the scheme as of November 17. Zurich India Mutual Fund has assets worth Rs 670 crore under management now under eight open end schemes and has an investor base of 1,35,000 unitholders.

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IDBI load change: IDBI Principal Mutual Fund has announced a revision in the load structure of one of its schemes -- IDBI Principal Deposit Fund. The change is applicable for Plans B and C of the fund. The fund has decided to levy an entry load of 4 per cent on NAV against the present no-load basis. The load structure change takes effect from November 20. The revised load structure will be in force till further notice, and the other features of Plans B and C will remain unchanged.

Tata Fund corpus: The corpus of Tata Mutual Fund increased to Rs 692 crore as of October 31 from Rs 534 crore as on March 31, the jump being largely due to the rise in the corpus of Tata Income Fund, whose base has moved up from Rs 264 crore to Rs 345 crore. The corpus of the equity funds increased from Rs 65 crore to Rs 110 cores, while that of the Tata Young Citizens Fund has gone up to Rs 52 crore from Rs 28 crore.

US-64 prices: The Unit Trust of India has fixed the sale price and repurchase price for US-64 at Rs 14 per unit and Rs 13.70 per unit respectively for October. These prices represent a 10-paise rise over the October prices.

Jardine Fleming India Fund: The shareholders of Jardine Fleming India Fund Inc. have approved an investment management agreement with Jardine Fleming International Management Inc., the fund's advisor. Terms of the agreement were not disclosed. The special meeting and the shareholder vote to approve the new agreement were necessitated by a change in control of Jardine Fleming International Management Inc. About 98 per cent of the shareholders approved the proposal for a new contract.

Approved securities: Seven open-end equity and debt schemes of SBI Mutual Fund were declared approved securities by the Government of Maharashtra. Charitable and other trusts, which usually invest only in government-approved securities, can now invest in MagnumInsta Cash Fund, Magnum LiquiBond, Magnum TaxGain, Magnum Multiplier, Magnum Equity Fund and funds under the Magnum Sector Funds Umbrella.