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Aarati Krishnan

INVESTORS in Birla India Opportunities Fund can hold on to their investments for the present. Though the fund's transformation into an "opportunities fund" is relatively recent, the environment appears favourable for companies that can capitalise on the "outsourcing theme". Though they may carry risks of their own, stocks in sectors such as IT, pharma and textiles may be less vulnerable to domestic or policy-related uncertainties than cyclical or economically- sensitive sectors.

Suitability: The Birla India Opportunities Fund would carry a higher risk profile than a diversified equity fund for two reasons. One, as it is a theme-based fund, it could take focussed exposures to one or two sectors, which could make it more vulnerable to sector-specific risks.

Second, given its focus on "growth" stocks, the portfolio is likely to be tilted towards high PE stocks. While the return potential from such stocks could be greater, the high valuations also expose such stocks to considerable sensitivity to any adverse news. For an investor who wishes to hold just one equity fund in his portfolio, a diversified equity fund would be a better choice.

Performance: The fund has recently transformed from an IT-focussed fund to theme-based fund, which will invest in sectors that can capitalise on outsourcing opportunities arising from competitive strengths.

Its track record until 2003, as a pure IT fund, may therefore not be very relevant to an investment decision now. Since December 2003, the fund has had a chequered track record. It has lost more value than some diversified equity funds such as Franklin India Bluechip, HSBC Equity and HDFC Taxsaver, but has fared well in comparison to other theme based funds with a similar focus.

The fund has taken significant positions in IT stocks, with consulting and hardware stocks together accounting for over 33 per cent of the portfolio by end-May. The stock selection within the IT universe favours second-line companies.

Pharmaceuticals, the second largest sectoral allocation, accounts for 16 per cent of the portfolio.

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