Buy stocks, not the market

S. Vaidya Nathan

ZURICH India Mutual Fund has said that investors should buy stocks and not the market. It is going about its investment strategy in the same manner. The fund has said in its latest monthly report that ``there are broad sector trends that will provide opportunities for several well-run businesses. Investors can profit by buying into these businesses at reasonable valuations. One must buy stocks and not the market''. Stating that there are opportunities in the market even today, the fund has made the following points:

* Cash-rich MNCs are buying back their shares as stock prices have fallen to `ridiculously low levels'.

* Several companies with steady cash business have dividend yields that are approaching bond yields.

* The expected improvement in rural income after the recent rabi crop should lead to higher demand for consumer goods and cement.

* The robust demand for generics in the western world provides an opportunity in the export market for some domestic companies.

* Large investments by the government in roadways will provide support to engineering and construction equipment companies.

* Disinvestment in PSUs is gathering pace.

In the fund's view, these opportunities can be exploited over the next 12-18 months. The fund has said the current bearish phase too will pass just as the technology boom of 2000 is now part of history. There is need for investors to retain their holdings in reasonable businesses and allow the current mood to pass.

DSP Merrill Funds: DSP Merrill Lynch has announced the following changes to its DSP Merrill Lynch Liquidity Fund and DSP Merrill Lynch Government Securities Fund:

* The exit load of 0.25 per cent will be charged only if the investments are made by way of switch-ins into the scheme and redeemed within 4 days of allotment. Earlier this exit load was applicable if units were redeemed within four days of allotment. The exit loads are not applicable if switch-ins are redeemed by way of switch-outs to other schemes of the fund.

* The investment focus of the fund has also changed. It will now invest 80 per cent or more of its corpus in money market securities and debt securities with a maturity or residual maturity at the time of purchase of less than 367 days or have put options that can be exercised within 367 days. The rest of the corpus would be invested in debt securities with maturity in excess of 367 days. These changes are to enable the fund have more flexibility in managing the portfolio.* For the Investment Pattern of Plan B, at present, there is a limit on investing in government securities with maturity of less than or equal to three years. The fund has now changed this to less than or equal to five years. The average portfolio maturity will not exceed three years.

* The Annual Recurring Expenses of the gilt scheme has been raised to 1.25 per cent per annum of average weekly net assets.

* The fund will endeavour to offer redemption within one business day at the applicable NAV for the purpose of redemption.

IL&FS recapitalisation: The share capital of IL&FS Asset Management Company (fund managers for IL&FS Mutual Fund) has been raised to Rs 25 crore from Rs 10 crore. The capitalisation is intended to expand distribution, widen the product range on offer and increase awareness of IL&FS Mutual Fund.

Morgan Stanley update: There has been a notable shift in the top holdings of Morgan Stanley Growth Fund. The top ten holdings now are Hero Honda, HDFC, Infosys Technologies, State Bank of India, Container Corp, HDFC Bank, Cipla, MTNL, ITC and Gujarat Ambuja Cements. The top ten holdings have a more diversified look than at any time in the past.

The fund has cash/cash equivalents of around 9 per cent. The net assets of the fund as of September 30 was Rs 652.22 crore. The value of non-performing assets is 0.17 per cent of net assets and illiquid stocks 1.28 per cent of net assets. The fund has no exposure in derivatives and investments in ADR/GDR of Rs 26.01 crore.

US-64 prices: The repurchase price for unitholdings of up to 3000 units will be Rs 10.30 per unit in November under the Special Liquidity Package, This is a rise of 10 paise over the October levels. The package was offered from August at Rs 10 per unit and is due to end in May 2003 at Rs 12 per unit. For holdings beyond 3,000 units, a repurchase facility at NAV-linked prices will be available from January 2.