From the look of it, mutual funds are extremely bullish on the prospects of old economy stocks and have hiked their allocations accordingly.

While a few months ago, cement did not even figure in fund portfolios, we are witnessing a steady pick-up in cement allocations over the past few months. The pricking of the dot-com bubble combined with a US slowdown in IT spending has made fund managers do an about turn on software. So while software continues to reign supreme given the country's inherent technical skills, old economy stocks in the cement and petrochemicals sectors (and to an extent even steel) are finding their way back into fund portfolios.

Cement Allocation

Growth funds	Date of holding	% Holding	NAV (Rs)
Tata Tax Savings	29 Dec,2000	11.0	12.3
Dhanaraksha 1989	1 Nov,2000	8.6	10.2
Pru ICICI Tax (Gr)	29 Dec,2000	7.2	13.3
K 30	19 Jan,2001	7.1	16.2
DSP ML Equity Fund	31 Jan,2001	6.3	18.3

The reason behind petrochemicals making a comeback is of course linked to the government's decision to lower stake in petrochemical companies and invite private participation in the sector.

Petrochemical Allocation

Growth funds	Date of holding	% Holding	NAV (Rs)
DSP ML Equity Fund	31 Jan,2001	12.3	18.3
Unit Scheme-1995 (Gr)	3 Jan,2000	10.7	178.9
K P Bluechip (Gr)	31 Jan,2001	7.2	24.5
K P Balanced (Gr)	31 Jan,2001	5.4	9.0
DSP ML Balanced (Gr)	31 Jan,2001	5.0	11.1

One fact that has increasingly become clear for fund managers is that the new-economy-formula-for-amazing-returns was a flash in the pan. They have learnt to adopt a more balanced approach in stock-picking and have given old economy their rightful share in portfolios.

Add Comments