Financial Daily from THE HINDU group of publications
Sunday, Jul 17, 2005
Financial Daily from THE HINDU group of publications Sunday, Jul 17, 2005 |
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Investment World
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Mutual Funds Markets - Mutual Funds Alliance Basic Industries: Sell S. Vaidya Nathan
INVESTORS in Alliance Basic Industries may reduce exposures following its indifferent performance over the past year, especially in the last six months. Investors could consider a switch to SBI Mutual's Magnum Contra Fund, which has a superior track record and provides an exposure that is comparable in sector preferences. The portfolio of Alliance Basic as of end May appears fairly impressive. Several stocks in the portfolio showed a firm undertone in prices. The sectors in which the fund has invested have done well over the past year as well as the last six months. But the fund's NAV has remained flat at a time when a host of diversified funds have turned in higher returns. Over the past three months, too, the fund has trailed benchmark indices as well as diversified funds. The fund is the top performer among sector-specific funds over a three-year period but now figures at the bottom end of the list in terms of performance this year. The shift in the rankings indicates the extent of deterioration. The fund appears to have made ill-timed entries into and exits from stocks. Else, it would be tough for a fund that has been long on stocks such as Siemens, ONGC, United Phosphorus and ING Vysya, to turn in such an indifferent performance. We have maintained a positive view on the fund over the past couple of years. Investors should, however, use the present upward trend in prices to cut exposures and lock into the fairly impressive gains the fund has generated over a three-year period. It may be the appropriate course as there could be a period of uncertainty ahead, as the fund house is to be taken over by Birla SunLife Mutual. A cogent strategy for Alliance Basic may emerge only after this process is completed.
Portfolio overview: Alliance Basic has an asset base of about Rs 60 crore. The fund has invested in less than 20 stocks consistently. A small asset base and a compact number of stocks, which usually create room for generating attractive gains, have not helped the fund this year. This indicates a slippage in the quality of management. The preferred sectors now are engineering, banking and metals. Fund facts: Alliance Basic Industries was launched in December 1999. The minimum investment amount is Rs 5,000. There is an entry load of 2.25 per cent. There is no exit load. The fund manager is Mr Ashit Kothari.
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