The fund's strategy of keeping a low exposure to economy-related stocks has been vindicated as the budget for 1999-2000 has not been able to influence private capital flows into the infrastructure-related sectors. According to Surendranath, the economy-related stocks are unlikely to catch investor fancy in the next few months as precious little has been done to facilitate foreign direct investments.

The slowdown in the manufacturing sector will continue to get worse and the fiscal deficit target for 1999-2000 is `overambitious' because the 18 per cent rise in indirect tax collections is unlikely to be achieved.

In February, Top 200 Fund has reduced exposure to Hind Lever, Dabur and MTNL and reinvested the proceeds in McDowell and Archies Greetings. Surendranath isbullish on the growth prospects of McDowell after the restructuring which led to the sale of its polymers business.

McDowell, he says, is ready to cash in on its brand strength and improve its asset utilisation. ``The company owns 6 out of 14 millionaire liquor brands (brands selling over a million cases) and has taken effective steps to bring down its debts to less than Rs 80 crore from a level of about Rs 300 crore prior to its restructuring,'' he adds.

The fund manager believes that Archies Greetings should be able to `substantially' expand margins with the introduction of higher value added products. As on February 28, 1999, both McDowell and Archies have a weightage of 1.82 per cent in the NAV of the fund. In refinery/petrochemical sector, the fund manager is convinced about the growth prospects of Cochin Refineries and prefers to remain invested as it is a potential takeover candidate by either HPCL or BPCL.

In IT sector, the fund continues to be a net seller because as a matter of policy, itbelieves in diversification of portfolio and keeping its exposure to the sector pegged at a predetermined level. The fund has only three scrips because BSE 200 did not provide any other option. The recent addition of a couple of software stocks to the BSE 200 has enlarged the fund manager's options and new stocks will be considered strictly on merit, Surendranath said.