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Fund Pick: UTI Mastershare

Background
Mastershare, the first Indian equity fund, seeks long-term appreciation. The fund was originally launched as a closed-end fund, and was extended for another term of ten years once it became due for redemption in 1993. The fund till date has provided a steady stream of annual dividend, the most recent being 16 per cent in September 1999. The fund has also given three bonus and two rights.

Performance
Launched in September 1986, Mastershare has an enviable track record of giving an annualised return of nearly 25 per cent over its long history. Mastershare's performance is a proof of long-term investing in equities. Mastershare has been fully into equities during the three bull frenzies and the interim troughs during its thirteen-year life span and has been able to outperform its benchmark in all market weathers.

However, the huge size of the fund coupled with sluggish stock market performance has deterred the fund from keeping pace with its aggressive growth peers. The Rs 2100 crore fund is increasingly getting concentrated in its top holding and also augmenting the exposure to growth stocks. The top ten stocks in the equity portfolio account for nearly 43 per cent of net assets and top 20 accounts for 59 per cent.

As on December 1998, the top 25 of the portfolio did not have any infotech stocks, but by September 30, 1999, the allocation changed with 9 per cent in software, 21 per cent in FMCG and 8 per cent in pharma. Mastershare is a truly blue-chip portfolio, with significant positions in large capitalisation cyclical stocks including a wide range of public sector undertakings (PSUs). Till recently, the fund was a laggard in a market which was dominantly propelled by select growth sectors. In the rising markets since November 1998 till December 1999, the fund has risen 61 per cent but lagged behind the Sensex which has gained 74 per cent.

Outlook
The outlook for Mastershare looks bright given its stock orientation and increasing market fancy for large capitalisation cyclical stocks. At the current market price of Rs 17, the fund will have a dividend yield of 9.4 per cent. The fund is available at an attractive discount of 27.07 per cent, which will translate into a yield of 37.12 per cent on redemption or if it becomes open-ended, assuming the net asset value (NAV) stays at the current level. Still another reason for it being an interesting investment case is the likely fancy for the cyclical stocks once the economy turns around. Better valuations for PSU stocks in the future as divestment gathers momentum will mean further returns. Mastershare is attractive for its dividend yield and appreciation potential for investment till its redemption or open ending.

FUND BASICS
Objective	Size	Disc (%)	Price	NAV 19/1/2000	Total Returns
Growth	2128 Cr.	27.07	17.00	23.31	27%
BENCHMARK COMPARISONS (%)					30/12/99
	1M	3M	6M	1Yr	3Yr
Fund	3.8	2.9	23.1	50.8	12.4
Sensex	8.3	5.1	20.9	60.9	15.4
Natex	16.5	18.6	46.6	89.5	22.1
Obj. Avg.	-	14.9	-	81.8	21.5
TOP HOLDINGS EQUITY (30/09/99)			Value (Cr)		Assets (%)
Hindustan Lever			179.60		8.44
ITC			145.98		6.86
Reliance Industries			98.95		4.65
Infosys Technologies			92.99		4.37
NIIT			82.57		3.88
Ranbaxy Laboratories			66.18		3.11
TELCO			62.78		2.95
Nestle India			61.50		2.89
Hindalco Industries			61.07		2.87
Videsh Sanchar Nigam			57.03		2.68
Hindustan Petroleum Corpn.			46.60		2.19
Smithkline Beecham Consumer			38.09		1.79
Novartis India			36.81		1.73
Larsen & Toubro			35.96		1.69
Bajaj Auto			34.26		1.61
Bharat Petroleum Corpn.			34.05		1.60
Grasim Industries			33.41		1.57
Bharat Heavy Electricals			32.98		1.55
MTNL			32.13		1.51
B S E S			31.71		1.49

Mutual Funds

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