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Suresh Krishnamurthy

INVESTORS in DSP ML Opportunities fund can stay with the fund, as its performance has improved considerably since mid-2001.

The fund, which was launched in March 2000, had a disastrous start, trailing S&P CNX Nifty during the 12-month ending June 2001. Since then, it has done considerably better. It made the most of the bull-run in stocks in sectors such as banks, capital goods and oil and gas.

Fresh investments, however, need not be contemplated now. Investors need to wait and evaluate if the improvement is temporary. If the performance vis-à-vis peers and the benchmark is sustained over the next 12 months, investors can contemplate enhancing exposures.

Performance: In the 12 months ended June 2003, DSP ML Opportunities gained about 33.5 per cent, substantially outperforming an index such as S&P CNX Nifty in the process. This compares favourably with peer performance too. However, over a longer period of two and three years, the fund fared poorly compared to peers, though it outperformed the indices.

Change in strategy: In the beginning, the fund used to invest in a handful of sectors, attempting to time them. However, its investment strategy appears to have changed, especially in 2002. Since then, investments have been made in a wider range of sectors and stocks. The top five stocks in the portfolio accounted for about 44 per cent of net assets at the end of December 2000, and 39 per cent in December 2001. However, in 2002 and now, the top five stocks accounted for 25-28 per cent of net assets.

In addition, the number of stocks in the portfolio has increased from about 25 in 2001 to about 35 now. These changes are also reflected in lower NAV volatility, a measure of risk. The risk, measured by the volatility, was lower in 2002-03 than in 2001.

Portfolio allocation: At the end of May 2003, the fund had a cash position of 7.84 per cent of net assets. The fund's exposure to mid-cap stocks since 2002 has generally been higher. Large-cap stocks and cash had been generally about 70 per cent of net assets with the rest invested in mid-cap stocks.

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