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From THE HINDU group of publications
Sunday, September 09, 2001













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Pioneer ITI Bluechip: Hold

Recommendation: Hold

Suresh Krishnamurthy

FRESH investments in Pioneer ITI Bluechip need not be considered now.

The fund's performance in the last quarter has been disappointing, though the slip-up is not alarming. Importantly, as the fund has delivered value over the long period, investors can stay with it.

Suitability: The Bluechip fund invests largely in large market cap stocks. This pegs the risk profile lower than the market average. However, the higher exposure to the technology sector now raises the risk. Given the higher risk profile, risk-averse investors may need to keep an eye on their exposures in the fund.

Investors can opt for the dividend option for now, as they are more tax efficient. However, if the tax norms change in the Budget to be presented in February this year then investors may have to re-evaluate.

Performance: The fund has lost around 10.7 per cent in the last three months. During the same period, BSE Sensex registered a decline of around 6.7 per cent. The performance has also lagged behind some of its peers in the industry. However, the long-term performance has been impressive.

The slide in performance was partly due to the sectoral and stock selections. The fund was overweight in the IT sector, at around 22 per cent, at end-June. With IT stocks generally trending down, the performance has taken a beating.

Exposure to the consumer goods sector was significant but SmithKline Consumer did not find a place in the portfolio, which was also significantly underweight in Hindustan Lever. As such, the firm trend in the FMCG stocks did not benefit the fund. Similarly, the lack of exposure to stocks such as Dr Reddy's and Ranbaxy ensured that the bull run in healthcare stocks benefited the fund only partially. Significantly high exposure to stocks such as VSNL and ICICI is also likely to have weighed down the performance.


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Portfolio allocation: At end-July 2001, the fund had 9 per cent in cash. The fund is still overweight in the IT sector. The exposure to this sector, at around 18 per cent, is much higher than its weight in an index such as Nifty, at around 11 per cent. Considering the continuing uncertainty surrounding software companies' revenue streams, the higher allocation increases the risk in investing in the fund. Apart from the IT sector, the major sectoral exposures are healthcare, consumer goods, telecommunication, and oil and gas.

In terms of stocks, the top exposures are ITC, Infosys, HCL Tech, VSNL and Larsen and Toubro. The exposure to stocks such as VSNL and Larsen and Toubro indicates that the fund is banking on the restructuring of these two companies to pay dividends. If the restructuring does not materialise, the performance may be hit. However, the track record of sectoral allocation and stock selection over a longer period suggests that investors can still hold on to their investments for now.


Section  : Mutual Funds
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