Alliance Equity fund is down 40 per cent YTD through October 18, 2001, which is also twice as much as the fall in Nifty, its benchmark. Despite the carnage, a sizzling 3-year return of 25 per cent is little comforting.
Indeed, the fund has been a significant beneficiary of its launch coinciding with the start of the technology super-cycle, which it capitalised on to the hilt. During this period, the fund made lavish payout with 5 half-yearly dividend aggregating 125 per cent, the last being 10 per cent in October 2000.
The fund manager, Samir Arora, focuses on growth stocks with solid cash flows, which also command high-price tags. And it shows in the average P/E of 22 times for his portfolio. The fund still remains a strong believer in technology and has parked 22 per cent of its money in these stocks - its largest sector weight.
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Barring pharmaceuticals stocks, the fund manager has ignored the growing market fancy for defensive plays -- cement, engineering, energy, services and FMCG. He cites the dearth of quality stocks in these sectors for his abstinence.
Keeping up with this strategy, Alliance Equity started off with aggressive stance in technology and MNC healthcare stocks. From a peak exposure of 62 per cent in June '00, the fund has consistently pared its technology exposure and showed sharp reflex to dilute its aggressive positions in technology stocks, by weeding out its portfolio heavyweights then - Global Telesystems, HFCL and Mastek. The fund has maintained its position with top rung software stocks - Infosys, Satyam, and HCL Technologies.
Beyond technology, the other prominent part of the portfolio is in domestic pharmaceutical stocks - Cipla and Dr Reddy's Laboratories as the fund manager believes in their earning potential.
Besides the large-cap orientation and a quality focus, the fund is rarely found with an individual stock weight in the portfolio going above 10 per cent. But it still packs it 70 per cent of assets in top 10 holdings.
Alliance Equity is not for every one, as the fund will remain on its extreme up and down course. But the management has a track record of putting up big numbers when the market for growth stocks surges.