``While the exact timing of a renewed focus on economic reforms will depend on the stability of the political environment, it is clear that there is a broad agreement on the need to forge ahead,'' says the report. ``The recent policy announcements on infrastructure, liberalisation of internet services and the removal of US sanctions should encourage private investment,'' it adds.

Morgan Stanley holds the view that companies, which can improve their earnings even in an indifferent external environment, should find higher valuations to their stock prices. ``The big story of 1999 is expected to be the pressure on Indian corporates to achieve growth through productivity and cost control,'' it states.

Withtrading in dematerialised shares becoming a norm rather than an exception, the AMC expects increased activity in the stock market. The changes in rules on takeovers is expected to give a fillip to trading volumes. While the AMC is optimistic for the current calendar, it has termed 1998 as one of teh most difficult years for the Indian bourses. A slew of factors saw the Indian market finish at te bottom of the performance ladder in teh Asian region. For the first time, inflows from foreign portfolio investors turned negative in 1998. ``A fluid political situation coupled with a weakening economy slowed the pace of economic reforms,'' the report states.

At the same time, the report says, teh market got increasingly polarised with quality stocks attracting greater premiums with stocks from pharma, IT and FMCG during particularly well.

For the third quarter ended January 1, 1999, the NAV of the MSGF has fallen 1.12 per cent while its benchmark indices, Crisil 500 and BSE 200 dropped by 1.44 per cent and 1.86per cent, respectively. For the first nine months of the current fiscal, the fund's NAV has risen by 6.12 per cent while its benchmarks have dropped by 14.2 per cent and 16.5 per cent, respectively.In fact, the spurt in indices in the beginning of this month saw the NAV of the fund scale a four year high at Rs 10.61 on January 8. The fund has a current NAV of Rs 10.71. The NAV has languished below the offer price of Rs 10 for a considerable period during the scheme's five year existence. With the current market price at Rs 6.15, the units trade at a 42 per cent discount to the NAV. Currently, top 25 holdings account for 79 per cent of the total portfolio. According to the fund manager, the fund reflects stocks that have the competitive edge to be successful. The top 15 holdings of the fund are Infosys, BHEL, HDFC, CONCOR, Zee Telefilms, Hero Honda, Telco, Burroughs Wellcome, TVS Suzuki, BFL Software, NIIT, Cipla, Software Solution, Bata and Glaxo.

As on January 1, 1999, the fund has a unit capital of Rs760.93 crore. Based on the current NAV, the corpus of the fund stands at 815 crore. With 60 per cent of the fund's assets in demat form, the AMC expects to save Rs 60 lakh on custody and transaction fees for the year. The fund has been ranked number 1 among 22 closed-end MFs for the 3-year period.

For the quarter, the fund earned a net surplus of Rs 30 crore with an income of Rs 105 crore and expenses & losses of Rs 44.74 crore. Besides, net change in unrealised depreciation/appreciation of investments is pegged at (-)29.73 crore. The fund has resorted to heavy profit booking with profit on sale of investments amounting to Rs 95.54 crore.

The unit capital of the fund has come down from Rs 801.5 crore on March 31, 1998 to Rs 760.93 crore, a reduction of Rs 40.57 crore. This means that the AMC has bought back 4.05 crore units from the secondary market in nine months. With the average market price during this period at Rs 6.10, the AMC has bought back units at a discount of 3.90 to the offer price of Rs 10.This has contributed Rs 15.8 crore to the unit premium reserve which now stands at Rs 54.65 crore. The same was at Rs 39.08 crore on March 31, 1998.