Incidentally, Bharat Forge has recently announced excellent third quarter results with an over 90 per cent growth in net profits. The gains on investments in Bharat Forge and Vikas WSP are nearly 5 times and 10 times the acquisition cost of the fund, Dileep points out. ``All our funds have clear objectives which are strictly adhered to and this is why we are not heavily exposed to any particular sector. The Growth Plan, which is a diversified fund, has been maintaining a broad-based portfolio. We booked profits in the software scrips when they peaked early this year,'' he says. In fact, Prudential-ICICI has a declared policy of limiting their stock and sector exposures relative to their respective weightages in the BSE Sensex.

He maintains that even the Income Plan, which has hardly any paper rated below AA+/ or equivalent and has a sizable 26 per cent of its assets in gilt-edged securities, has performed better than most other funds and is among the top five in the category with an annualised return of over 13.5 per cent.

``The higher yields are largely due to the low interest rate regime and the gains made in active gilt trading. Our portfolio is deliberately structured to provide a cushion against a spurt in interest rates due to unforeseen factors. We can easily liquidate our gilt holdings in a scenario of rising interest rates. If this were to happen, the average portfolio maturity of 3.3 years can easily be reduced to 1.6 years,'' he explains.

According to Dileep, `derisking' the portfolio is top priority and says this is evident from the fact that there has not been a single downgrade in the portfolio of the Income Plan. ``In fact, some of the papers are likely to be upgraded in due course.''

In fact, the sectoral allocation of the Income Plan shows that holdings in gilts account for 27.42 per cent of net assets, while another 60.92 per cent is in AAA and equivalent and the balance in AA+/- instruments. The cut in interest rates on PPF funds announced by the government on January 14 has benefited the valuation of gilt securities held by the fund under the Gilt Plan with the annualised returns in the month of January to date touching nearly 40 per cent. In the two days since the announcement of the cut in rates, the NAV of the Gilt Plan has improved from Rs 10.243 to Rs 10.578 under the Treasury (Growth) option, and from Rs 10.579 to Rs 10.677 under the Investment option.