Even in the current rally, the NAV of the fund has failed to look up. The NAV of the fund was Rs 3.63 as on April 28. Since then, the fund has risen by less than 30 per cent to current levels. The fund was launched in July, 1994.

This will be the second equity fund from LIC Mutual Fund to go open-end. LIC Dhanvikas (1) had gone open-end in April, 1998 with a NAV of Rs 8.64. The fund has now managed to go past the par level with the August 25 NAV at Rs 10.75, a gain of 47 per cent from Rs 7.31 on April 29, 1999.

However, any growth in the NAV of Dhanasmriddhi looks remote. With a corpus of mere Rs 11 crore, the fund is spreadover 32 stocks and 5 debt instruments. With such a wide-spread portfolio, the fund's investment strategy clearly lacks direction and transaction and operational costs of a large portfolio on a small asset base adversely impact the NAV. Tthe top equity holding is Digital Equipment as on July 14 where the fund has a exposure of mere Rs 92.57 lakh.

To sample the minuscule holdings of the fund, cosnider this : the fund has a holding worth Rs 3.90 lakh in Reliance, Rs 7.45 lakh in Glaxo, Rs 6.12 lakh in Bharat Petroleum, Rs 5.68 lakh in Nalco, Rs 13.39 lakh in HPCL and Rs 10 lakh in Mico. "Courtsey demat, the fund has managed to take such a small exposure in some of these stocks where a minimum market lot would otherwise cost more than the quantum of investments,'' said an analyst. Ironically, the top two holdings of the growth fund are debt instruments from IFCI (step-up bonds at Rs 2.22 crore) and IPCL (Rs 1.04 crore).

Although the market has witnessed a frenzied bull-run in the last three months, no attempthas been made by the fund managers to downsize the portfolio of the fund and give a fillip to the NAV.

"With NAV at Rs 4.56, original investors have seen a capital erosion of over 54 per cent. Thus, its a catch-22 for them since they can neither stay in the fund nor redeem their units. With any substantial improvement unlikely in the NAV, investors should ideally redeem their units,'' said an industry observer.

The fund will charge an entry load of 1 per cent on fresh subscriptions with minimum subscription at Rs 5000. the initial issue expneses of 3 per cent will be charged from the scheme. Thus, for every Rs 100 invested, Rs 97 will be available to the fund manager for investments in the markets.