S. Vaidya Nathan

INVESTORS in the Reliance Media and Entertainment Fund may retain their holdings, as there could be scope for gains. A string of policy announcements by the Government have been favourable for companies operating in this domain. This could lead to enhanced investor interest in this sector over a one-to-two year period and result in higher valuation levels.

A small asset base may also be an advantage as investment options in this space are now limited. The fund has made a fairly impressive start, posting gains of about 50 per cent over the past ten months.

Over the past month, the Government has unveiled policy initiatives that have liberalised the operating environment for media companies. Measures such as permission for FIIs to invest in media stocks within the 26 per cent cap for foreign investment, clearance of DTH proposals of the Star and Sun groups, and the introduction of revenue-sharing and FDI in the FM radio space, have spurred interest in this sector.

The entertainment sector is also poised for robust growth with a sizeable expansion in cable and satellite television homes over the past few years. Their share has risen to more than 50 per cent of TV households for the first time. This augurs well for broadcasters and content providers. And investment options in the latter category could deliver value.

The fund has stuck to a portfolio of ten stocks. It has consistently maintained a high level of cash and cash equivalents.

As of end-May, it had about 16 per cent in cash. This strategy has enabled it to capitalise on opportunities depending on price trends.

In stock selection, the fund has adopted an aggressive strategy. It has significant holdings in stocks such as Crest Animation, Tata Elxsi, Deccan Chronicle and UTV.

It has more than 10 per cent of assets in each of these stocks. Exposure levels in established players such as Balaji Telefilms and Zee Telefilms are at modest levels.

A surprise omission is NDTV (New Delhi Television Ltd); the fund appears to have missed a quality opportunity that has delivered attractive returns.

The reason for the omission is not clear. That it has a sizeable holding in TV Today, an inferior performer, only makes the absence of NDTV more glaring.

Suitability: The fund is appropriate for investors with a penchant for high risk. The returns may be robust in the short term, and the sector could under-perform most others over long periods. It may be better to keep exposures at modest levels as a proportion of monies invested in equity funds.

Fund facts: This fund was launched in September 2004. The minimum investment amount is Rs 5,000.

The entry load is 2.25 per cent. There is no exit load. The fund has a small asset base of about Rs 20 crore.

(This article was published in the Business Line print edition dated July 3, 2005)
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