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S. Vaidya Nathan

INVESTORS in Alliance Equity Fund can partially trim exposures to capitalise on the rise of about 100 per cent in its NAV over the past year. Business Line had maintained a `hold' stance for much of 2003 on the fund.

We had suggested a `sell' in August 2003 as there was a host of uncertainties following the exit in controversial circumstances of its long-time fund manager, Mr Samir Arora.

The uncertainty over the investment strategy by the new fund management, the possibility of a sharp decline in the asset base and its adverse effects on performance were specific concerns. The fund's asset size has shrunk about 30 per cent over past five months. Only the sharp bullish phase in equities has helped neutralise the effect of this decline in asset base.

It is too early to take a call on the investment strategy by the new team as the market has kept moving up. Aggressive stock selection continues to be a theme that runs through the portfolio and this has helped Alliance Equity figure among the top 25 equity funds in 2003. But the ability to handle any downturn in the market is unproven.

In this backdrop, investors can sell a part of their holdings to capitalise on the uptrend. There is a possibility that the bullish phase may have steam left. Investors could, therefore, retain a part of their exposures to the fund.

Suitability: Alliance Equity is a diversified fund. But the risk levels are higher due to its aggressive approach. The fund is appropriate for investors with a penchant for higher risk. Investors can stay with the dividend option as it offers superior tax efficiency, at least in fiscal 2004. Dividends are exempt from tax.

Portfolio overview: The fund continues to be heavy on banking stocks with 17 per cent of assets in this sector. Its focus on banks such as Kotak Mahindra, Jammu & Kashmir Bank and ING Vysya Bank has paid off. So have other top holdings Trent, Tata Motors, E-Serve, Hinduja TMT and Siemens.

Despite redemption pressures, the fund has continued to remain fully invested in equities. The fund had an asset base of about Rs 250 crore at the end of November 2003.

Fund facts: Alliance Equity Fund was launched in August 1998. The minimum amount is Rs 5,000. The entry load is 2 per cent. There is no exit load. The fund manager is Mr Dhawal Mehta. The fund has turned in annual returns of about 35 per cent since 1998 and 10 per cent over the past three years.

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