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March 13, 2000

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Fund Pick: Magnum Balanced Fund

Background
Magnum Balanced, an open-ended balanced fund provides periodic dividend. Initially, the fund was flexible with its asset allocation based on its view of the market. Launched in September 1995 when the market was going down, the fund tilted towards debt. But since the beginning of 1998, the fund increased and maintained its equity allocation to 70 per cent of the portfolio. It gave a 1:10 bonus in November 1997.

While entry into the fund is at nil load, there is a graded exit load of 0-2 per cent in favour of long-term investors.

Performance
The fund has given an annualised return of 45.64 per cent since its launch. In its early existence, the fund was unable to deliver any return as the market was falling and it had a flexible asset allocation strategy. But the fund was successfully able to guard its assets, though with high volatility. The fund also trailed behind aggressive peers like Alliance '95.

An increased equity allocation, an aggressive equity strategy and the rising market have driving the fund's performance. The realigned portfolio was a blend of cyclical and growth stocks diversified evenly across sectors and with 30 per cent in debt.

Since December 1999, the fund has significantly augmented its positions in the growth sectors. Further, the debt component has also not been raised with the increasing size of the fund. Aggressive on equities, the fund is way ahead of its peers and ranks first with very high returns of 96 per cent over the past three months and 226.5 per cent over the past one year ended February 29, 2000.

As on date, the fund has drastically pared its holdings in the diversified companies stocks and other cyclicals in favour of software (49%), media (14%), consumer goods (13%) and telecom (9%). The fund owes its strong performance to the spurt in infotech and telecom stocks.

Outlook
Magnum Balanced owes its recent performance to few big bets, which have gained sharply. The fund has a modest allocation to quality debt paper too. However, in its current form, think of this fund as an aggressive equity fund with some debt allocation as well. And it shows in its volatility. The fund has recently announced a dividend of 30 per cent and a 1:2 bonus with the record date as March 17, 2000. For a short-term investor, at the current NAV levels of Rs 47.27 this will result in a return of 6.22 per cent after the exit load of 2 per cent, besides assuming the market-risk during his stay in the fund.

Fund Basics          
Objective Size NAV: 3/3/2000 Sell Price Buy Price Total Returns
Balanced 234.74 cr 47.88 47.88 47.88 45.64%
Benchmark Comparisons (%)         29/2/2000
  1M 3M 6M 1Yr 3Yr
Fund 18.38 108.98 159.39 254.49 64.62
Sensex/IBEX 2.35 14.38 11.49 46.99 14.89
Nat. Index/IBEX 8.18 28.71 32.62 66.83 23.03
Obj. Avg. 4.82 30.99 41.55 88.61 35.92
Top Holdings (1/2/2000)         Net Assets (%)
Top equity holdings          
Aftek Infosys         11.27
SSI         10.08
Zee Telefilms         6.31
Ramco Systems         5.53
Sri Adhikari         5.42
KLG Systel         5.30
Shyam Telecom         4.33
Vikas WSP         4.00
Sriven Multitech         3.84
Bharat Electronics         2.91
Top debt holdings          
ICICI         3.84
ACC         2.81
IDBI         2.75
Nalco         1.13
Wockhardt         1.09
Britannia         1.67

Source: Value Research

Mutual Funds

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