Value of diversified MF portfolios stressed

By Our Corporate Reporter

CHENNAI, JAN. 8. The value of diversification not just across asset classes (like equity, bonds and cash) but also across sectors in equities such as technology, pharma, FMCG and cyclicals had been the investment strategy of Kothari Pioneer Mutual Fund, according to Mr. Vivek Reddy, Chief Executive Officer, Kothari Pioneer Asset Management Company.

In the performance report for the third quarter ended December 31, 2000 of Kothari Pioneer Mutual Fund, Mr. Reddy has stated that however growth oriented the investors were, they should be deploying a portion of assets ( at least 20 to 30 per cent) in income funds.

Also, diversification across sectors in equity portfolios was critical as most investor portfolios had moved from underweight to overweight in technology leaving the mutual fund overexposed to the tech sell-off. Given that current valuations of topline Indian information technology companies look extremely attractive, even factoring in a slowdown in their revenue growth, 30 to 40 per cent weightage to technology stocks would be appropriate, according to Mr. Reddy.

For the current year he believed that well managed diversified funds could give 20 per cent plus returns annually. Though this figure might not sound extravagant, it was far better than what one could earn from alternative investments of a similar risk profile.

According to Mr. Reddy, the bond markets were expected to remain stable and income funds might turn out yields of 10 per cent plus.

While the domestic markets fell during the last quarter, there were clear signs that the earlier correlation between Indian markets and their U.S. counterparts, especially Nasdaq was waning. Given the concerns about the technology sector and the prevailing valuations, investors rebalanced their portfolios by increasing exposure to pharma, FMCG, PSE and cyclical stocks, according to the AMC's report.

Also FII flows were affected by the announcement that MSCI (Morgan Stanley) was shifting to a free float basis for determining country weightages for its indices. Though the change was to occur in phases it affected sentiment in the belief that the new format would impact countries like India significantly due to the restrictions on foreign ownership of equity.

However Kothari Pioneer believes that the prospects of top rung Indian IT companies continue to be good and buying would emerge across sectors.

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Section  : Business
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