As a result of ten years of economic reforms favouring liberalisation, we now have MNCs in many sectors like software, pharmaceuticals, consumer durables and non-durables, banking, automobiles and also in infrastructure sectors like cement and power.

However, MNCs here not only mean those companies which are based overseas, but also those who have operations in India. The definition of MNCs also includes Indian companies, which have a sizeable part of their income coming from overseas operations and exports. As India liberalizes further, investment opportunities will become available in other segments like media and entertainment, consultancy, hospitality etc.

While these companies have very well adapted to the Indian working atmosphere, Indian investors have also developed a penchant for these companies like fish takes to water. The acceptability of these companies is amply evident from their share in the Indian markets as also the very high trading volumes and liquidity in these companies on the bourses.

MNCs today have become synonymous with good quality and better brand recall products, better serviceability, transparency, dynamism, aggressive sales pitch and a sustained effort in the direction of wealth creation for shareholders.

Further, in the current scenario of furious shake-out in the Indian industries by way of mergers and acquisitions, MNCs are bound to play a major role with their deep pockets.

While, these companies have attendant risks such as the frequently changing rules of indirect taxes like import/customs duties, as also the fluctuations in foreign exchange rate, the strengths of these companies far outnumber the risk factors. Interestingly, the recognition of the potential of this formidable lot has lead to mutual funds launching schemes that restrict their investment universe to MNCs (Indian or foreign) only.

With the presence of MNCs across the entire corporate spectrum, investors investing in MNC funds will virtually have a portfolio comprising of companies that are who's who from diversified sectors.

While, currently MNCs operate largely in the sectors of pharma, FMCG and software (Indian MNCs), the poor showing by the first two sectors has resulted in the NAVs of these funds suffering a loss.

Nevertheless, considering the long-term potential of these sectors, it might be just the right time to invest in these funds. Discussed below are the three MNC funds that investors can choose from: UGS 1000, launched by Unit Trust of India, was the first to invest predominantly in MNC stocks. The interval fund opens for sale and repurchase for a week on the first Monday of every month.

The fund has since its launch given an annualised return of 12.63 per cent. Launched in June, 1998, the fund started on a strong wicket with FMCG and pharma stocks accounting for 75 per cent of the net assets with moderate stakes in software and engineering. However, the delay in shifting to software sector and the underperformance of pharma and FMCG stocks pulled down the fund's growth rate.

While the fund increased allocation to ICE sector to 36 per cent by February 2000, the downturn during March-May 2000 knocked 30.6 per cent off the NAV. Currently the fund is well diversified across ICE (26 per cent), consumer goods (Durables and Non-Durables) (19.5 per cent), pharma (10.7 per cent), finance & banking (11 per cent), engineering (10 per cent) and petrochemicals (10 per cent). The fund has a quality portfolio of companies with professional management. Given its charter and diversification, UGS 10000 can be attractive long-term investment for above average returns.

After the takeover of Apple AMC, Birla Sunlife AMC relaunched Apple Goldshare as Birla MNC Fund. The open-end fund has, since re-launch in December '99, been on a decline, dotted by brief spurts. The fund has till date lost 18 per cent. The fund is diversified with a tilt towards growth sectors of software, pharma and FMCG stocks.

As on June 30, 2000, the fund has a 23 per cent allocation to pharma, 21 per cent to FMCG and 16 per cent in software stocks.The fund also has a decent exposure of 11 per cent in engineering and a moderate 5 per cent stake in auto and 3 per cent in telecom. The fund has off-beat stocks like Framatone Conn and Cmac Sentum Electron in the sectors of telecom equipment and electronics, respectively. K MNC from Kotak Mahindra AMC was launched in March 2000. The fund till date is up a minuscule 0.94 per cent.

The launch of the fund during the downturn has enabled the fund to pick up stocks at attractive prices. While the fund is yet to invest almost one-third of net assets, the fund is diversified across the sectors of FMCG (23 per cent), pharma (16 per cent), agro-chemicals (5 per cent), engineering (6 per cent), software (5 per cent) and oil & gas (3.5 per cent).

-- (Value Research)