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Aabhas Pandya
Mumbai, June 9: Equity markets are likely to witness fresh inflows of around Rs 600 crore in July/August when the three umbrella funds close for subscription early next month. All these funds will be chasing the same set of stocks in FMCG, IT, and healthcare sectors since they comprise of sector-specific schemes with identical objectives.
These equity-oriented funds from UTI, SBI and Tata asset management companies effectively offer as many as 14 schemes to investors since each of these funds will have separate accounts, separate portfolios and separate net asset values. While Unit Trust of India is targeting a collection of around Rs 500-550 crore, the umbrella funds from the other two AMCs are expected to mop up another Rs 100 crore. DSP-Merrill Lynch has also lined up an umbrella fund with options to invest in IT, healthcare, consumer and cyclical sectors. However, for the time being, the fund has been put on the backburner.
A substantial portion of this money will flow into a handful of stocks sinceall the three funds have offered more or less identical funds, dedicated to growth sectors. More, an overwhelming majority of stocks in these sectors have a low market capitalisation. For instance, SBI Magnum Sectors Umbrella Fund, UTI Growth Sectors Fund and Tata Life Science and Technology Fund have offered IT, pharma and FMCG funds under their respective umbrella schemes. While UTI dooes not specifically offer an FMCG fund, it has a brand fund which is likely to invest a certain portion in FMCG stocks with strong brands like Gillette, Dabur and Marico.
``Although IT, pharma and FMCG have been lying low for some time, it is likely that funds dedicated to these sectors will walk away with a major chunk of money,'' said an analyst. What differentiates these three umbrella products is the contra fund by SBI MF, petrochemicals & services sector funds by UTI and telecom and agrochemical funds by Tata Asset Management.
According to India Index Services and Products (IISL), the top-rung information technologystocks in the country have a combined market capitalisation of 51,231.4 crore as on June 7. Of this, the top five stocks of Wipro, Infosys, Satyam Computer, NIIT and Pentafour account for more than Rs 41,000 crore. The relatively high market capitalisation of the top-rung IT stocks has been largely a function of the high price enjoyed by these scrips and not equity capital. ``Floating stock will be a key issue once these umbrella funds enter the market to make purchases,'' said an analyst, adding that with a number of IPOs from software companies lined up, some of these funds may invest in new IT companies.
In the case of pharma companies, the S&P CNX Pharma Index has a market capitalisation of Rs 34,588.61 crore while the market cap is Rs 26,456 crore for the FMCG Index as on June 7. The FMCG Index comprises of tea and coffee, personal care and food and food processing indices. Here also, few key scrips account for the bulk of market capitalisation.
However, what may work to the advantage of these fundsis their timing of entering the market which is likely to coincide with declaration of first quarter results. In case some fancied counters witness a sell-off after their results, these funds will be able to pick up stocks at relatively cheap valuations.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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