If you want to know which sector is most likely to witness a recovery over the next few months, keep a close watch on fund portfolios and their sectoral allocations. Fund managers have their ears close to the ground and can see a recovery happening from a distance. If sectoral allocations are anything to go by, then the auto sector is waiting for a revival to happen.

Our study of equity fund portfolios reveals that mutual funds have begun accumulating auto stocks on hopes of a recovery in that sector. Long ignored for most of last year, auto allocations are now making their presence felt in fund portfolios. (To know more about which sectors occupy the highest and the lowest allocations in fund portfolios, run more queries in our interactive Query a fund

Auto allocation in fund portfolios

Fund Names	Date of Alloc.	% Alloc.	NAV (Rs)
MAGNUM TAXGAIN	31 Dec,2001	16.60%	12.5
SUNDARAM GROWTH	31 Dec,2001	11.70%	11.7
SUNDARAM TAX	31 Dec,2001	11.40%	8.2
MAGNUM MULTIP 93	31 Dec,2001	11.30%	8.6
ZURICH I TAX G	31 Dec,2001	10.60%	17.7
HDFC GROWTH G	31 Dec,2001	9.10%	7.7
BIRLA MNC G	31 Dec,2001	9.00%	27.8
PIONEER ITI BAL (G)	31 Dec,2001	8.30%	8.5

Not all the enthusiasm for auto stocks is unfounded. While commercial vehicle (CVs) sales will perk up only on an economic rebound, cars and two-wheelers are on a roll. Demand for cars and two-wheelers is as robust as ever and this is more than reflected in their monthly sales. Even the quarterly results declared by Hero Honda and Bajaj Auto bear adequate testimony to this fact.

Hero Honda tops fund allocations

Fund Names	Date of Alloc.	% Alloc.	NAV (Rs)
BIRLA MNC G	31 Dec,2001	8.6	27.8
MAGNUM CONTRA	31 Dec,2001	7.2	9.0
HDFC GROWTH G	31 Dec,2001	6.9	7.7
PIONEER ITI PR. PLUS (G)	31 Dec,2001	5.7	21.1
PIONEER ITI BLUE. (G)	31 Dec,2001	5.3	20.2
HDFC TAX 2000 G	31 Dec,2001	5.2	10.2
BIRLA BALANCE G	31 Dec,2001	5.0	8.7

Auto was relegated to the bottom of fund portfolios for too long. It has now moved up considerably in fund allocations and in some cases has even overtaken software allocations. The growth potential of this sector is indeed significant and the markets seemed to have begun to appreciate that fact. That would certainly explain the sharp runup in stocks prices of Hero Honda and Bajaj Auto and even TELCO, while the latter is still in the red. Investors may want to take note of this and keep their eyes open for auto allocations in their mutual fund portfolios.

 

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