Fund managers shift focus from tech to pharma, FMCG

Jai Kumar NR

New Delhi, Nov 27: Equity funds are increasingly focussing on more defensive sectors like healthcare, consumer durables and financial services. Fund managers seem to be playing safe by taking major exposure to pharma and FMCGs, while pruning investments in technology.

During the past seven months (April-October 2001), major fund houses like Sun F&C MF, Alliance Capital MF, Pioneer ITI MF, Birla Sun Life MF, Kotak Mahindra MF, JM MF, Zurich India MF, Sundaram MF, IDBI-Principal MF, Prudential ICICI MF, HDFC MF and DSP Merrill Lynch MF have increased their equity funds’ exposure to pharma, FMCG and financial services. While almost all the funds have increased their weightage on pharma, some have reduced their exposure to FMCG and financial services during the period.

Downsizing technology investments has paved the way for more cash at these funds’ disposal. This has forced fund managers to hunt for alternative investment options. As the tech sector turned highly volatile, which reflected on their NAVs, followed by redemptions by panicky investors, fund managers went underweight on the technology. This has also opened the possibility for more diversification.

‘‘The increase in equity funds’ exposure to these sectors may not be the result of a strategy. But, it has more to do with the rising cash position, thanks mainly to a sharp cut in technology,’’ says Value Research CEO Dhirendra Kumar, which tracks funds.

The sharp increase in their exposure to FMCGs raises interests as this sector’s growth estimate is not very promising, he adds. For instance, Birla Advantage has increased its exposure from 9.78 per cent (net assets) as on March 2001 to 16.99 per cent as on October 2001, to consumer non-durables. The fund’s exposure to this sector has jumped from 22.65 per cent to 32.42 per cent.

Alliance Equity has also increased its investment in FMCGs from 3.64 per cent to 8.28 per cent. Its exposure to pharma has also jumped from 10.93 per cent to 15.87 per cent. Pioneer ITI Prima’s FMCG exposure has gone up from 1.08 per cent to 4.3 per cent. Pioneer ITI Prima Plus has increased its healthcare investment from 9.45 per cent to 19.87 per cent during the period. Pioneer ITI Bluechip has also increased weigtage on healthcare from 8.97 per cent to 11.74 per cent and on FMCGs from 10.33 per cent to 10.97 per cent.

The three funds of IDBI-Principal (Equity, Growth and Index Fund) have also seen a sharp spurt in their healthcare and financial services exposure.

In fact, the Index Fund has increased its financial services exposure from 9.98 per cent to a high of 28.54 per cent. Its Equity Fund has raised its weightate on 13.08 per cent to 16.1 per cent.