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S. Vaidya Nathan

INVESTORS in Birla Mid-Cap Fund can contemplate paring exposures as its performance is not as impressive as benchmark indices or peer funds such as Franklin Prima, Sundaram Mid-Cap and UTI Master Value Unit Plan, to name a few.

The fund was launched when the mid cap-stocks where in the initial stages of a second re-rating in a span of two years. In the bull market of 2003, quite a few mid-cap stocks rose manifold and several others posted gains of over 100 per cent. In such an environment, the Birla Mid-Cap Fund had returns of 115 per cent over the past year, trailing the CNX Mid-Cap Index by 20 percentage points.

The portfolio of the fund appears to have stocks that could deliver attractive returns. A superior quality of portfolio churning would, however, be necessary if the fund is to at least match, if not outperform, its benchmark and peer funds.

Over the next year, selective stocks may notch up sizeable gains. Across-the-board price spurts of the 2003 kind appear unlikely. Stock selection would be of greater importance in determining the investment performance, unlike in 2003.

It is on this parameter that the track record of Birla Mid-Cap Fund does not inspire confidence. In this backdrop, investors could contemplate a switch to mid-cap funds with a superior track record.

Suitability: Mid-cap stocks and funds that focus on them are appropriate for investors with a high appetite for risk. As an asset class, such stocks have delivered returns that are more than commensurate with their higher risk profile over the past two-and-half years. Birla Mid-Cap's performance, however, does not match up to this trend.

Investors may be better off staying with the Dividend Option till they pare exposures, as dividends are likely to be exempt from tax.

Portfolio overview: The preferred sectors of the fund are IT, pharmaceuticals and packaged foods, which collectively account for about 35 per cent of its assets. It has also invested in quite a few small-cap stocks such as ETC Networks, Heritage Foods and Genesis Software, that enhance the risk profile.

Holdings in Goodlass Nerolac, Aventis, Siemens, MICO and Thermax are some of the more promising exposures.

: Birla Mid-Cap Fund was launched in October 2002. The minimum subscription amount is Rs 5,000. The entry load is 2 per cent. There is no exit load. The manager is Mr Ayaz Motiwala.<137>

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