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Comeback Kid

Smart stock-picking has seen a turnaround in this fund's fortunes. If you like the technology sector and are comfortable with a concentrated portfolio, this is the right fund for you

Alliance New Millennium spent half its life in the bottom of the tech funds' category, but in recent times it has staged a smart recovery.

The fund had an ill-fated start in January 2000-it more than halved its NAV between February and December 2000. Years 2001 and 2002 were no different. The first three years were bad for the tech sector, and hence tech funds. Within tech funds, this fund was among the worst performers.

But from there, Alliance New Millennium's fortunes turned for the better. It managed its turnaround thanks to a greater focus on mid-caps, a relatively concentrated portfolio and some good stock picks. The fund beat its average peers in each quarter of 2003 to become the second best fund with a return of 67.29 per cent. In 2003, it benefited phenomenally as stock prices of Bharti Tele-ventures and e-Serve International zoomed and the fund had over one-third of its portfolio in these two stocks.

Alliance New Millennium continued with this duo-stock combination in 2004 as well. However, as the rally faded, the fund lost 10.75 per cent in the first six months of 2004, which was in line with the category average. Later, it bounced back with good show in the next two quarters. It ended 2004 with a 24.72 per cent return against 23.77 per cent gain for the average tech fund. Till May 5, 2005, the fund has maintained a good lead over the category average and the BSE IT Index, its benchmark.

The fund has had a liking for mid-caps in the past. Stocks like e-Serve International, Hinduja TMT and Geodesic Information have helped the fund earn smart gains. The fund is holding Bharti Tele-ventures since its listing in February 2003. However, it has not ignored large caps. Infosys has always been a part of Alliance New Millennium. But in August last year, the fund left its mid-cap orientation in favour of a large-caps tilted portfolio and reduced the number of stocks to an average 14 scrips, making the portfolio even more concentrated.

Overall, Alliance New Millenium is one of the better tech funds today.