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S. Vaidya Nathan

INVESTORS can cut exposures in the Alliance Buy India Fund, which focusses on the consumer and healthcare sectors, to take advantage of the improvement in the NAV by about 65 per cent over the past year.

The fund has had an unimpressive track record since its launch in January 2000. Its performance over the recent bullish phase also does not inspire much confidence.

Over the past three months, a host of diversified and sector-specific funds have generated higher returns than this fund. The NAV is Rs 7.7.

The portfolio does not point to returns being in line with the risks involved. Over a three-year period, the annual returns have been about 9 per cent. This too, is largely a consequence of the healthy gains over the past year.

For those who had invested in the initial public offering at Rs 10 per unit, cutting exposures now may mean taking a knock of 23 per cent. It may be better to take this course than wait for the NAV to move up to the initial investment price.

Such an approach would enable investors to deploy the money in funds with a better track record. Funds such as Alliance Basic Industries, Prima, Bluechip, HDFC Equity, HDFC Prudence and HDFC Tax Saver are options that come with an impressive track record cutting across different time periods.

Suitability: As a sector-specific fund, the risks are high. But the fund has so far not delivered returns that would compensate investors for the risk element.

Going forward, the fund may be hard-pressed to deliver on this score. The concentrated exposure in a small number of stocks increases the risk element. Notably, even such a strategy has not delivered superior returns in the recent bullish phase.

In this backdrop, irrespective of their risk profile, investors in this fund should consider cashing out when the going is good.

Portfolio overview: The fund has steered clear of frontline consumer good stocks, which has paid off in the recent bullish phase. But the exposures in stocks such as Pantaloon Retail and Trent, which account for 25 per cent of net assets, is a cause for concern.

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