The Hindu Business Line : Alliance Basic Industries: Buy

AN INVESTMENT may be considered in Alliance Basic Industries Fund as its portfolio holds promise to deliver appreciation even after the bullish phase in equities over the past six months. The fund has an impressive track record of four years across bullish and bearish phases in the market. Over the past year, the NAV has risen about 40 per cent.

The fund has an aggressive management style. It has opted for a mix of large-cap and mid-cap stocks with a tilt towards the latter over the past six months. Its exposures to stocks such as Jindal Steel, PSL Holdings, Alok Industries, Chennai Petroleum and United Phosphorus have delivered attractive returns.

These exposures inspire confidence about the quality of stock selection and the likelihood of the fund maintaining its performance.

Suitability: The risk profile of the fund is similar to those of diversified funds. Though it is sector-specific, the wider ambit of investing outside of information technology and consumer products has led to a diversified portfolio.

The returns have more than adequately compensated for the risk element involved. Alliance Basic should figure as one of the preferred choices for any portfolio of mutual funds along with the likes of Templeton India Growth, Prima, HDFC Equity, HDFC Long Term Advantage and HDFC Top 200 Fund.

The funds of Alliance Capital are to move into the Birla Sun Life Mutual fold. This, in our view, is unlikely to affect the performance of the fund. Birla Sun Life did go through a difficult after the meltdown in tech stocks in 2000.

Over the past year-and-a-half, it has got its act together with a new CEO, Mr S. V. Prasad, who headed Zurich Mutual before its takeover by HDFC Mutual. The transition is likely to be smooth.

Portfolio overview: The fund has a focus on stocks from the engineering and commodity sectors. Its approach of focussing on a small number of stocks has been a crucial factor in the impressive performance.

The top ten exposures account for about 80 per cent of the assets; individual stocks weights are in the 5-12 per cent range and indicate an acceptable degree of diversification. The asset base, at Rs 76 crore is small and provides for a high degree of flexibility in management.

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