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Aarati Krishnan

INVESTORS can use the spike in the net asset value (NAV) of Birla Equity Plan over the past seven months to pare exposures. Though the fund has outperformed the majority of its peers over the past six months, it has trailed quite a few diversified funds in the four years since launch.

The fund's enhanced exposure to small and mid-cap stocks in its portfolio and the fairly sharp swings in its sectoral allocations from quarter to quarter suggest that the fund carries a higher risk profile than most diversified funds. Therefore, investors in the fund can pare exposures and switch to a diversified fund with a more consistent track record.

Suitability: The changes in the fund's portfolio since 1999 show that it takes focussed exposures to one or two sectors at a time. This coupled with the large number of small and mid-cap stocks dotting its portfolio, make investments in the fund a fairly risky proposition.

Performance: Reckoned on a point-to-point basis, the Birla Equity Plan has comfortably beaten the S&P CNX Nifty in the four years since launch. The fund has generated compounded annual returns of around 11 per cent per annum, while the Nifty has registered a marginal loss in value since February 1999 the date of launch).

But the fund's absolute returns have been of a much lower order than funds such as Zurich India Equity Fund, Zurich Top 200 Fund and Franklin India Bluechip Fund over the same period.

There is also a second factor that weighs against the fund. While Birla Equity Plan may have beaten the Nifty in the holding period since launch, its performance relative to the index has not been consistent. The fund delivered sharp outperformance of the Nifty in 1999, but returns fell substantially short of the Nifty in the bear markets of 2000 and 2001. In 2002 and the first four months of 2003, the fund has once again kept ahead of the Nifty. As a result, investors in the fund are likely to have seen fairly sharp swings in returns from year to year.

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