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Suresh Krishnamurthy

INVESTORS in UTI Master Equity Plan Unit Scheme can continue to hold. After the merger of MEP-93, MEP-94, Mep-95, MEP-96 and MEP-97, the fund has now morphed into a fund that is heavily invested in large-cap equities.

However, investors still need not add to their investments in the fund. The fund performance over the next year needs to be evaluated before considering fresh investments.

Portfolio allocation: The fund size is now about Rs 632 crore. At the end of February, the five funds had about Rs 720 crore of assets under management. This is indicative of mild redemption pressure during the restructuring period. Nevertheless, the fund is now the largest equity linked savings scheme and is among the largest diversified equity funds in the industry.

The fund had a cash position of less than 5 per cent at the end of April. About 78 per cent of net assets were invested in stocks forming part of the S&P CNX Nifty Index. Only 9 Nifty stocks did not figure in the portfolio. The top five stocks in the portfolio were ITC, Reliance Industries, Infosys, HPCL and SBI. These five stocks accounted for 31.6 per cent of net assets. The fund had `overweight' positions in 17 Nifty stocks. Overweight position indicates higher exposure to a stock compared to its weight in S&P CNX Nifty Index. For example, M&M's market capitalisation works out to 0.43 per cent of Nifty's market cap. However, the fund had 1.62 per cent of its net assets in M&M.

Prominent stocks in which the fund was overweight were ITC, HPCL, Zee Tele, Tata Steel and BHEL. The fund was also underweight in 26 Nifty stocks. Prominent stocks in which the fund was underweight were Hindustan Lever, Wipro, Reliance, HDFC, HDFC Bank and ICICI Bank.

Outside of Nifty, the fund had 84 mid-cap and small-cap stocks. They accounted for about 17 per cent of net assets. Prominent among them were Punjab Tractors, Ashok Leyland, Pfizer, Cummins India and Corporation Bank.

The ability of the fund to outperform the indices and its peers largely depends on two factors:

Investment performance of the mid-cap and small-cap stocks

Change in investment strategy

The exposure of nearly 17 per cent in mid-cap and small stocks can provide a good boost to performance if the rally in mid-cap and small-cap stocks persists. However, if the rally peters out, then it can have a negative impact on performance. This is where a change in investment strategy might be useful.

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