The Hindu Business Line : Alliance Buy India Fund: Book profits

INVESTORS should consider booking profits in the Alliance Buy India Fund to lock inthe impressive 100 per cent returns from the fund over the past one year.

As a theme fund playing on the purchasing power of Indian households, it has capitalised well on the sharp upward re-rating of retail and consumer goods stocks over the past year.

But given the relatively high market levels and the demanding valuations on retail and consumer stocks that make up the fund's portfolio, its performance could slow down.

Recent changes in the fund management team and the proposed transfer of the Alliance funds to Birla Sun Life, make it a good time to cash in on the fund.

Investors may switch to a diversified fund with a good record where the fund manager will have the flexibility to choose from a wider range of sectors and stocks.

A diversified fund would be a better option for one investing in equities for the long term and wishes to follow a buy-and-hold strategy.

Though the fund started out with a defensive orientation due to its focus on FMCG stocks, its investment strategy in recent years has been aggressive. It takes concentrated exposures, both in stocks and sectors of its choice.

Just the top three stocks, for instance, usually determine over 30 per cent of its NAV and the fund has consistently held no more than 15-16 stocks in its portfolio.

Consumer non-durables has been the fund's top sector choice over the past few months, with a 30-35 per cent weight in its portfolio. The fund's stock choices within each sector have been quite good. For instance, Godrej Consumer, ITC and Dabur, the fund's picks in the FMCG sector, have out-performed most of their peers in the past year. On the performance front, only few diversified equity funds (Reliance Growth Fund, HDFC Taxsaver and SBI Magnum Taxgain) have managed to beat this fund over the past year. The recent performance has helped improve the Buy India Fund's long-term record.

But viewed on a year-to-year basis, the fund's performance lacks consistency when compared to diversified funds such as HDFC TaxSaver or Templeton India Growth Fund.

There are a couple of other uncertainties too. With the proposed takeover of Alliance schemes by Birla Sun Life, there could be a possible reshuffle in the fund's management team.

Even if this does not happen, there is a possibility of a slowdown in performance in the transition period.

The fund has only recently undergone a change in fund manager, with Mr Dhawal Mehta (who quit the fund house in January 2005), being replaced by Mr Ashit Kothari and Mr Taher Badshah, as portfolio managers for this fund.

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