With technology stocks taking a backseat and cyclicals hogging the limelight in the recent past, Alliance Basic Industries has found a place at the top of the performance charts.
The main reason for this super performance has been the fund's mandate of investing specifically in cyclical and commodity businesses. So, during the periods when technology tumbled, this fund largely remained unhurt. Lower volatility of cyclicals along with higher returns has translated into one of the best risk-adjusted returns (sharpe ratio) in recent times.
With its theme stocks driving the markets in the past two-and-a-half years, this fund has been a top performer during every rally in this per-iod. The result: first quartile returns in both 2001 and 2002. Even in 2003, the fund has maintained its first quartile status till date.
Thus, after making handsome gains from some of its top picks such as HDFC in 2000, Alliance Basic Indus-tries pared its financial services exposure in 2001 to make way for automobiles, diversified and engineering stocks. This allocation helped it beat diversified equity funds during the post-9/11-February 2002 bull run, which was led by energy and technology stocks. This, however, doesn't mean that the fund has not made mistakes. Alliance Basic Industries was a late entrant in Hindustan Petroleum and Bharat Petroleum. Alliance Basic Industries Fund has also, it has not participated in the major re-rating, which has taken place in energy majors Indian Oil Corporation and Oil and Natural Gas Corporation.
In spite of all this, the fund's long-held auto picks along with early entry and heavy concentration in bank stocks in 2002 charted its course to the top during the calendar. By far, Jammu & Kashmir Bank and Punjab National Bank have proved to be its best bets. As these picks have continued to perform the fund has also done well in the year to date through July 31, 2003.
Overall, Alliance Basic Industries has stuck to its mandate from the start. It has also delivered the goods. The fund can be used to diversify a portfolio laden with new economy stocks. Alternatively, investors looking for a portfolio comprising economy-sensitive stocks can give this fund a shot.
This article was originally published on August 04, 2003.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
