Morgan Stanley comes good at last
Aug 24, 1999

Author: PersonalFN Content & Research Team

For the first time in five years, Morgan Stanley Growth Fund's (MSGF) market price touched its par value. On Monday, MSGF's units (demat) closed at Rs 10 after touching an intra-day high of Rs 10.10 on the Bombay Stock Exchange (BSE) and Rs 10.20 on the National Stock Exchange (NSE). However, in the physical segment, its units closed at Rs 9.85 on the BSE and Rs 9.80 on the NSE.

Morgan Stanley Growth Fund, a close-ended scheme (redemption in March 2009), was launched in early January 1994 (BSE Sensex - approx. 3,900 points) amidst much fanfare. This was the first international mutual fund (MF) to launch its scheme in India, and as expected, with its expertise, not to mention the hype, attracted a large number of investors. Morgan Stanley garnered Rs 9.8 bn, and instantly became the largest private sector MF in the country. In fact, Morgan Stanley's entry in the Indian MF sector opened the floodgates for other overseas MFs like Taurus MF to launch its schemes in the country.

However, it did not take long for investors to get disillusioned with Morgan Stanley, given its unfocussed investment strategy. To be fair, the period of rapid expansion of mutual funds also coincided with a decline in stock prices (BSE Sensex - approx. 3,000 points in February 1995). Also, since most mutual funds had made investments in smaller, less liquid companies, the values of their portfolios fell faster than the overall Index levels.

With other international funds also failing to deliver, investors in these funds were left in the lurch. This left a mark on the MF sector and it was only a matter of time before investors began exiting from MFs. Listed schemes like MSGF were trading at heavy discounts to their NAV.

However, the advent of the private MFs made Morgan Stanley pull up its socks. It has overhauled its portfolio under Vinod Sethi (the fund manager), and the new MSGF portfolio wears a streamlined look.

Portfolio as on March 31, 1999

From a market price of Rs 6-6.50 in February 1999, MSGF has done well for itself to achieve par value within a period of 6 months. MSGF's investment strategy of investing in high and rising return on equity (RoE) companies has paid it rich dividends. Speaking of dividends, those who have benefited most from MSGF's rise in market price are the ones who collected the 7.5% interim dividend, and now find the NAV at Rs 10 from Rs 7.50 just two months ago.