From THE HINDU group of publications
Sunday, July 08, 2001


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Birla IT Fund: Sell

Recommendation: Sell

S. Vaidya Nathan

INVESTORS in the Birla IT Fund can contemplate cutting exposures in the fund, at least partially.

The fund had a cash position of 50 per cent. This may suggest that it could be well-placed to capitalise on the downtrend in technology stocks. The fund could benefit from such a strategy. But, on the flip side, a few factors suggest that investors may be better off looking at the following aspects:

*The fund's track record has been rather pathetic in the last 24 months. Business Line had advocated schemes of Birla Mutual Fund in 1997-99 and parts of 2000 -- when the fund had a good track record. But its performance in the last 24 months has warranted a total re-look at what the fund may do in terms of investment strategy.

*During this period the fund made so many changes to the portfolio of its various schemes that it is difficult to be confident about the consistency of the investment approach. The changes only led to a massive under-performance of the broad market and one has to be sceptical on this score.

*The fund's cash position may offer stability to the NAV at a higher level and from this perspective, this may be a good time to pare exposures.

*The portfolio has only an 18 per cent weightage in frontline tech stocks. Going forward, a lot would depend on stock selection and asset allocation to specific stocks. Given its current portfolio composition, it is tough to confidently assert it would go for frontline stocks.

In this backdrop and in the wake of possibility of some more downside to the tech sector stock prices, investors could cash out. The exceptions may be high-risk investors who are willing to take some exposures in the hope of gains from present levels.

Suitability: The scheme is appropriate for investors with a high risk appetite, willing to take chances on the fund's ability to pick itself up. Such investors may be better off staying with the dividend option. This is suitable as a superior tax efficient option and for facility to take cash out when the fund performance improves.

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Portfolio status: The most significant aspect is the cutting down on equities (perhaps taking losses in the process) and the hike in cash to 50 per cent. The fund has a mixed bag of stocks in its top ten. Frontline stocks, such as Infosys and Hughes Software, sit alongside second- and third-rung stocks such as Moser Baer, SSI, Satyam Computer, Citi Corp Securities and Mascot Systems. The fund's top ten exposures account for around 45 per cent of its net assets.

Fund facts: Birla IT Fund is the open-end growth fund. It is the former Apple Platinum Share which was re-positioned following the merger of the Birla Mutual Fund and Apple Mutual Fund. The fund paid out a dividend of 25 per cent in February 2000. It turned in returns of minus 53 per cent since its relaunch in December 1999. There is an entry load of 2 per cent over the NAV and there is no exit load. The fund has an asset base of Rs 41.09 crore.

Section  : Mutual Funds
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