Chescor cuts exposure to infotech stocks

Prachi Verma in New Delhi

The road was probably never bumpier for those riding on infotech, and this has led several IT-heavy investors to change horses for steadier old economy steeds. London-based Chescor International, one such investment management company that manages funds in India for retail and institutional investors in Canada and the United Kingdom, has switched horses in a big way.

Chescor, which manages funds for AGF Canadian asset management company in India, has been around since 1993 and during 1999-2000 it had invested heavily in the IT stocks. About 45 to 50 per cent of its funds were invested in IT shares in early 1999-2000 but with uncertainty looming over this sector, it has cut its exposure to the infotech sector to to 5 per cent this year.

“At present, we are investing only 5 per cent of total funds in the Indian IT stocks and this is primarily because we want to cut down our risks. We are also diversifying our portfolio to invest in new sectors which will again reduce risks,” Chescor International director and portfolio manager Sachin Mohindra said.

Chescor is at present handling a fund worth $35 to 40 million, down from $60 million invested by the company in the Indian stock market beginning 2000, with its peak-level investment around $80-90 million with returns in the range of 20 to 25 per cent.

“We are also trying to buy shares of those companies which are under-valued in order to lower risks. The focus this year is capital protection and not chasing major returns,” Mr Mohindra said.

Due to the slowdown in infotech coupled with current global tension, Chescor is expecting a loss of up to 30 per cent on its current investments. It has invested about $34 million in areas like petrochemical, automobiles, cement, pharma, FMCG, engineering and infotech.

“Last year, we faced a loss of 30 per cent on our total investments, primarily due to heavy investments in IT stocks. We are expecting a similar loss this year too for which we have diversified our portfolio so that we do not have all eggs in one basket,” he said. Repatriated outflows on redemptions last year touched a high of around $25-30 million whereas this year it is likely to touch $10 million.

“Indian IT stocks are still very attractive in the long term but not in short term,” Mr Mohindra remarked.