Alliance Sector Select Series: Hold

Recommendation: Hold

Aarati Krishnan

INVESTORS with an appetite for risk may consider investing in the Alliance New Millennium Fund.

Investments may be phased out over a period to guard against the possibility of a further fall in technology stock prices. The fund's aggressive portfolio strategy and its focus on mid-sized, rather than large technology stocks, results in above-average risk, even within the universe of technology dedicated funds.

After a sharp setback to its performance in the initial period after launch, the fund has churned and restructured its portfolio to improve performance. This could have had the impact of bringing down the average cost of the portfolio. The following changes in the New Millennium portfolio between end September 2000 and end December 2000 are noteworthy:

Stocks sold: The fund has sold out a range of small and mid-cap stocks in the portfolio. ATCO Industries, HCL Infosystems, Hughes Software, Mastek and SSI entirely exited the portfolio. Many media stocks were also jettisoned, including Galaxy Multimedia, Television Eighteen and Zee Telefilms.

Stocks bought: Wipro and Creative Eye were added to the portfolio in the quarter. The fund also added bonds of Infrastructure Leasing and Finance Services.

Sectoral shifts: The fund has altered its allocations among infotech, media and telecom stocks significantly in the October-2000 quarter. The exposure to infotech stocks increased from 58.8 per cent to 61 per cent, though the fund liquidated a range of stocks in this sector. The media exposure was brought down sharply, from 6.8 per cent to just 1 per cent, after the sale of Zee Telefilms.

The fund's exposure to telecom stocks went up from 20 per cent to 24.7 per cent. Total equity exposure climbed marginally from 85.6 per cent to 86.7 per cent as a result of the above changes.

The fund also invested a part of its cash/money market assets in debt, acquiring bonds from Infrastructure Leasing and Financial Services. These accounted for 1.1 per cent of the net assets by December 2000. The exposure to cash/equivalents fell from 14.4 per cent to 8.4 per cent. The fund's total asset size fell from Rs 504.73 crore to Rs 435.18 crore over this quarter.