MUMBAI, November 16: Over the past month, Bluechip has increased its exposure in cash. The fund had a 19 per cent exposure in cash and money market instruments as on September 30, which has increased to 41.03 per cent by October 31. It is a step in the right direction given the current fluid market situation.

Bluechip was converted into an open-end fund in January after the completion of its tenure as a closed-end fund. After the rollover and conversion, the fund has virtually started afresh, as before redemption, the fund was almost in cash. As a closed-end fund, it was mainly into medium and small cap stocks.

However, today its portfolio is concentrated in large-cap, blue-chip stocks as its name suggests. The fund's performance this year is almost similar to the growth it witnessed during the primary market boom in 1994. It has been one of the top performing equity funds over the past year with an appreciation of 40.02 per cent after Reliance Vision, which has appreciated by 43.76 per cent. Unlike Reliance Vision which has a significant debt exposure, Bluechip is a pure equity fund.

Since July 31, Bluechip has maintained its exposure in twelve stocks, though it divested in MTNL in August only to re-enter in September. The fund has moved out of six stocks including BoB, Crossland, EI Hotels, HLL, L&T and Reliance. New additions over the past quarter include Tata Tea, Gail, Wipro and Smithkline Pharma with the last three having been added in the month of October.

As on October 31, the top industry exposure are 16.92 per cent in Information technology (excluding Wipro), Banking (8.68) and Petrochemicals (8.62). In all, the fund has an exposure in only sixteen stocks. Information technology accounts for almost 30 per cent of the fund's equity exposure.The increase in cash exposure over the past month is significant. This is more so as the fund is relatively small and more susceptible to gyrations in the capital market. The fund has reduced its equity exposure by 22 per cent in October 1997. Consequently, the fund has been able to arrest the fall in NAV. While the Sensex has fallen by around 10 per cent, Bluechip has fallen by around 7 per cent since October 31.

According to the fund manager, the past few weeks have been the most volatile in the history of the world markets. First came the plunge in the Hang Seng Index and then came the wave of panic selling by investors in the European and US markets. Dow Jones also saw its worts fall in absolute terms on a single day.

The events in the world markets had its fallout on the Indian markets as well with foreign institutional investors selling across the board. The fund manager adds that the near term outlook uncertain. The FII inflow has slackened due to the possibility of the rupee depreciating against the US dollar and the turmoil in other Asian markets. Bluechip has increased its exposure to cash, which will be reinvested in fundamentally sound stocks at lower levels.

In a rapidly falling market, the strategy to liquidate equity positions at relatively higher levels for reinvestment at lower levels should work well. With an active fund manger, the fund is an ideal vehicle for investors looking beyond the present gloom. The fund is available at a 3 per cent load. During the last three months, the fund's NAV has seen an appreciation of 3.13 per cent, while the BSE Sensex has given a negative return of 7.32 per cent. Since Bluechip's inception, the return from the fund has been 17.83 per cent while that from the BSE Sensex has been 4.98 per cent.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.