Birla Capital International AMC is flumoxed by the fact that investors are still not coming to the equity market despite the fact that the index has zoomed nearly 40 per cent since January this year. S K Mitra, director of the AMC feels that inspite of the fact that interest rates are falling steadily, investors are not making the switch. The total corpus of Birla Mutual Fund has crossed the Rs 500 crore mark, thus making it the largest private sector mutual fund. But most of the recent additions have been to its income scheme - Income Plus.

Birla Capital believes that equities are the best bet because they have outperformed all the investment options over the long term. And it is this long term investment strategy that has paid off as far as their first scheme - Birla Advantage Fund is concerned. Explains Bharat Shah, fund manager of the fund, ``We have adopted a very planned strategy for our investment. We think long-term, buy fundamentally strong values and focus on risk control. The superior returns that the Advantage Fund has given, are on account of this philosophy.'' Indeed thinking long term, the Advantage Fund has risen by a whopping 37.23 per cent since inception in February 1995, with the NAV going up from Rs 9.40 on February 24, 1995 to Rs 12.90 on Wednesday. In contrast, the BSE sensex has gone up by 25 per cent.

The investment approach is that the stocks are selected using a bottom-up approach, investment decisions are blended with macro views and the focus is on conservative valuation. ``Our stock selection criteria are high quality, visionary corporate managements, companies with strong sustained growth prospects, globally competitive businesses, high quality of earnings and positive cash flows to sustain growth without equity dilution'', says Shah. He emphasises that Birla Capital's approach is one of selecting companies that have an ability to compound earnings. ``Such companies do not need to come to the market too often'', said Shah. In fact, the fund expects that in the next 2-3 years, only 2000 odd companies out of the 6500 plus listed companies will be in a position to survive. Out of these only 500 odd are expected to hold promise and of these only about another 100 might fit the fund's investment plans. Further Shah said that the fund also minimises on the transaction cost of the scheme by not churning the portfolio too much. ``With our kind of planned investment approach, we do not need to transact in the market on a regular basis'', he said. The same philosophy has been adopted by the fund for its offshore float, India Advantage Fund. Launched in August last year, the fund has seen a 50 per cent appreciation in NAV.

The top four sectors represented in the portfolio are software, pharmaceutical, consumer goods and banking. During the same period, the BSE sensex and the National share index have moved up by 28.2 per cent and 21.6 per cent.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.