MUMBAI, July 15: The corpus of Morgan Stanley Growth Fund dipped to Rs 855.02 crore in the year 1996. This follows the repurchase of units worth Rs 55.84 crore from the secondary market during the year. In 1996, the fund had started with a unit capital of Rs 910.86 crore. At the time of the issue in January 1994, the unit capital was Rs 981.80 crore.

Meanwhile, while acknowledging that the fund has had a negative return overall since its inception, the portfolio managers have asked unitholders to see their performance in the light of the overall market environment.

The latest annual report has sought to compare the performance of the fund with that of the BSE-200 index and the Crisil 500 index. The NAV of the unit, at Rs 9.28 on May 16, 1997, has recorded a 14.9 per cent rise since March 31, 1997. On the other hand, BSE-200 and the Crisil 500 have gone up by 11.3 per cent and 10 per cent, respectively during the same period.

The NAV has now improved to Rs 10.02. This is attributed to a restructuring of the portfolio. As per the details of the restructuring given in the latest annual report, the fund has adopted a two-pronged strategy: reducing the number of holdings and increasing the concentration levels and changing the profile of companies held in the fund's portfolio.

The weightage of the fund's top 10 holdings has increased from 28 per cent to 52 per cent in the last twelve months. The top 50 holdings now account for nearly 75 per cent of the fund's portfolio.

Changing the profile of the companies is in line with the belief that there is going to be a clear polarisation of the Indian industry. This is because the process of liberalisation is expected to result in intensified competition and productivity improvement.

As a result, only strong, well managed players will get stronger and better, while the mismanaged companies will become increasingly marginalised and less relevant, say portfolio managers, Akash Prakash and Ashutosh Sinha. The criteria they are using for identifying such companies are:

4 dominance in their respective product markets, 4 strong focus on productivity improvements and cost cutting,

4 efficient use of resources,

4 ability to create entry barriers, good growth prospects and an ability to be a world class player.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.