There is considerable talk of knowledge-driven industries hogging the limelight in the coming years. However, that doesn't mean that fund managers have given up on traditional industries like cement and engineering completely.

A look at the latest sectoral holdings of fund houses seems to indicate that funds haven't dumped old economy stocks altogether. For instance, funds interest in cement stocks may be on the wane, but as the table below indicates, cement may be down, but definitely not out.

Open-ended mutual funds	Date of holding	% Holding	NAV (Rs)
Magnum Balanced Fund	1 Sep,2000	7.1	12.9
K 30	6 Oct,2000	6.3	14.3
DSP ML Equity Fund	31 Aug,2000	6.0	15.3
Alliance Basic Ind. (Gr)	31 Aug,2000	4.2	8.0
DSP ML Balanced (Gr)	31 Aug,2000	3.0	9.9
Sun F & C Value (Gr)	31 Aug,2000	3.0	17.7

(The above table only shows mutual funds with over 3.0% cement holding)

Ditto for engineering. The engineering sector  a pillar of the old economy, also commands significant presence in fund portfolios.

Open-ended mutual funds	Date of holding	% Holding	NAV (Rs)
K P Balanced (Gr)	30 Sep,2000	8.3	7.8
Sun F & C Value (Gr)	31 Aug,2000	7.4	17.7
K MNC	6 Oct,2000	7.2	8.3
Canbonus	30 Sep,2000	7.2	8.7
Birla MNC Fund (Gr)	29 Sep,2000	7.0	28.2
Zurich (I) Top 200(Gr)	29 Sep,2000	6.1	11.6
Sun F&C Balanced (Gr)	31 Aug,2000	5.1	7.4
Canglobal	31 Jul,2000	4.4	6.6
JM Equity Fund (Gr)	31 Aug,2000	4.0	9.3

(The above table only shows mutual funds with over 4.0% engineering holding)

Funds haven't got rid of old economy stocks for two reasons. One is because there is still light at the end of the old economy tunnel. Quality old economy companies have millions of rupees in fixed assets, stocks, real estate and machinery. These assets have been accumulated over years and can't be replicated overnight. Combined with operational efficiency, these assets could reap untold benefits for these companies, and fund managers have got that in the back of their minds.

The other reason for holding old economy stocks is because of increasing volatility in equity markets. Old economy stocks have taken a backseat in recent times and do not witness the kind of volatility that has become a trademark with technology stocks. Consequently old economy stocks offer a better hedge in times of volatility. Fund managers seem to have got that in the back of their minds as well. So they devote a portion of their funds to old economy stocks, so as to protect the NAV (net asset value) from instability arising from higher allocation to technology.

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