Alliance Equity: Hold

Recommendation: Hold

Aarati Krishnan

INVESTORS in Alliance Equity Fund can stay with the fund in the light of the fund's reasonable performance.

The Alliance Equity Fund has comfortably outperformed the market indices over the past two years, figuring among the top performers in investment returns, even in the bear market of 2000. The fund is aggressively managed, with active portfolio churning and a consistently high allocation to technology stocks.

The fund's investments in some volatile mid-cap stocks makes for a fairly high risk-profile. The investment strategy focusses on stock-specific decisions rather than on sectoral allocation. The changes in the portfolio between September 30 and December 31, 2000 are largely reflective of the price action in individual holdings.

New additions: The fund acquired fresh exposures in Britannia, BHEL, and Wipro during this quarter.

Holdings enhanced: The fund has used its substantial cash position in the beginning of this quarter to add to its holdings in a range of stocks. ITC, Aptech, HCL Technologies and Satyam Computers were added to its holdings. Existing positions in Hero Honda, Punjab Tractors, HDFC Bank, Reliance Industries, Nestle India, NIIT, Himachal Futuristic, Sterlite Industries and Sterlite Optical have also been augmented.

Holdings liquidated: The fund booked profits in a range of second-rung software stocks, while ATCO Industries, Mastek, SSI and Tata Elxsi completely exited the portfolio. The media exposure was also cut sharply, with the fund selling out of Galaxy Entertainment, Television Eighteen and Zee Telefilms. Pritish Nandy Communications and Indian Hotels have also been sold out.

Holdings reduced: The fund trimmed its holdings in HDFC, Archies Greetings, Digital Equipment, Leading Edge Systems and Knoll Pharma during the quarter.

Sectoral allocations: After the above changes, the fund has stepped up allocations to foods and beverages (from 2.8 per cent to 9.2 per cent), and pharmaceuticals (from 5.7 per cent to 6.6 per cent).

Exposures to IT stocks, consumer goods and banks and financial institutions have changed just marginally or have remained unchanged. With most of the media stocks exiting the portfolio the fund's exposure to the sector has fallen from 4 per cent to less than 1 per cent. At end-December 2000, the fund was almost fully invested, with a mere 2.2 per cent cash position, down from 13.1 per cent from end-September 2000.