GIC D'mat -- Time to begin reducing exposures

Suresh Krishnamurthy

THE performance of GIC D'mat last year was good, though largely influenced by the large cash position it carried.

Given the prevailing stock prices, it may be better to start reducing exposures to the fund. The NAV is Rs 7.68 per unit.

Suitability: The recommendation is suitable to investors who may want to reduce the overall cash position in their portfolios. The valuations in the stock market are attractive from a historical perspective.

Investments made now hold the potential to deliver decent returns over the long term. Investors could thus begin switching their exposures to funds with a superior performance record over both bull and bear phases of the market. The large cash position in the fund is a risk factor that investors wanting to maintain exposures should consider.

Performance: Since inception, the fund has turned in a relatively unimpressive show. Launched in March 1999, it continued to underperform the market and its peers substantially. From launch to end-December 2000, the fund shed close to 12 per cent in value. In the same period, the Nifty gained around 21 per cent. Most of its peers registered returns of more than 50 per cent over the same period.

Since December 2000, the fund outperformed the indices and its peers by a fair margin. However, on an overall basis, the fund's performance since inception is much below that of its peers and the benchmark indices. It declared dividends of 8 per cent in July 1999 and 7.5 per cent in January 2000.

The fund has started underperforming the indices and peers in the last month. This is a reflection of the large cash position. When stock prices go up, the fund is likely to under- perform if it continues to maintain a large cash position.

Portfolio: The fund, which had around 45.6 per cent in cash at the end of July 2001, increased it to 49 per cent by end-October. In terms of sectors, the fund had a relatively concentrated portfolio at end-October, with around 20 per cent of the NAV invested in healthcare stocks.

Other major sector exposures are diversified and automobiles. The top stock exposures are Ranbaxy, Cipla, Ashok Leyland, Reliance Petroleum, and Larsen and Toubro. The investment pattern of the cash position will be crucial in deciding the fund's future performance.