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Gung-ho on Equities

Most MIPs are on the verge of breaching their maximum equity exposure limit. In order to contain equity exposure some MIPs have had to sell shares in order to keep within bounds, while others have been rescued by fresh inflows.

With stock markets moving higher every day, the equity allocation of most MIPs is close to the their maximum permissible limit. The equity exposure of half the funds in the category at an all time high. These include FT India MIP (18.65%), LIC MIP (12.22%), Magnum MIP (13.32%), Prudential ICICI MIP (14.68%), Principal MIP (9.05%). Moreover, the equity exposure of 6 MIPs is just under a per cent short of breaching the maximum limit to which they can invest in equities.

In order to contain equity exposure some MIPs have had to sell shares in order to keep within bounds, while others have been rescued by fresh inflows.

MIPs generally invest 10-15 per cent in equities. In the recent past as bond returns have slowed down many fund houses have launched MIPs with an enhanced equity exposure limit. For example HDFC MIP Long-term and IL&FS MIP, can have a maximum equity exposure of 25 per cent of the portfolio. Thus, HDFC MIP Long-term currently has the maximum equity exposure of 20.72 per cent as on December 2003.

The past six months have seen the Sensex gain 70 per cent. Thus, MIPs, which have maintained a higher equity allocation, are leading the performance chart.

On the other hand, Sun F&C MIP and Templeton MIP-DM didn't have any equity exposure and are at the bottom of the performance chart.