The Telegraph
Since 1st March, 1999
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Mutual Funds
Mutual funds roiled
Satish John
Mumbai, Sept. 9: Mutual funds counting on PSUs to boost net asset values (NAVs) hit pay-dirt when IBP and IPCL were hawked. Today, hopes of another windfall, were blown away.
HPCL and BPCL led the slide in shares of state-owned firms, and as it happened, mutual funds that had stacked up on these stocks were caught napping when the market decided to give Saturday’s selloff setback a thumbs-down.
“Clearly, we did not expect this,” a fund manager affiliated to a public sector mutual fund said as the day turned murkier for PSU stocks. The fund, with a huge stash of HPCL and BPCL shares, was looking to make a killing when successful bidders of HPCL and BPCL would make an open offer and unlock values of holdings.
Most mutual funds in business are overweight on these stocks. Fresh from the experience of making big bucks in IBP and IPCL — where bids way above the market price were tabled —funds had hoped the same for HPCL and BPCL.
UTI’s growth sector petro fund saw its net asset value slide by 10 per cent today — from Rs 12.24 to Rs 11.04. The fund is among the few from the UTI stable to have outperformed the market in recent times. Almost 10 per cent of its Rs 58-crore portfolio is in the form of cash or in other liquid assets. “They are expected to average prices by buying at current levels,” sources said.
The fund is believed to have placed buy orders in the market after Bharat Petroleum and Hindustan Petroleum slid to their intra-day lows of Rs 200 and below, brokers said. This could not be confirmed with the mutual fund.
Fundamentally, the scrips look attractive at this price even if divestment does not happen, analysts tracking the sector said. However, they concede privatisation was the trigger that could set off a larger rally.
Measured this, US-64, Unit Trust’s flagship scheme, lost 2.17 per cent at Rs 5.84 from its Friday close of Rs 5.97. On September 5, the NAV of the scheme was Rs 6.05.
Most market-savvy private sector funds trimmed stock investments in August, as they took fright from the discordant notes emerging out of the ruling NDA coalition. But, as today’s selloff proves, caution was not enough for these funds to escape the whiplash.
Zurich India, Alliance Birla Mutual Fund, HDFC Equity Plan had seen some of their schemes cut exposure to shares by a few percentage points. This, say analysts, was not enough since they jumped on the PSU bandwagon late.
Most mutual funds are looking afresh at information technology. That was apparent when Wipro and other tech stocks led the damage control on bourses.
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