The Foreign Hand

Multinational companies offer many attractions -- a clear and transparent management, focus on business and a clean balance sheet. The shares of these companies are also going cheap. And Birla MNC offers you a portfolio of these shares in the form of an open-ended fund.

Erstwhile Apple Goldshare, Birla MNC Fund has delivered decent returns recently. The fund is up 30.67 per cent in the past six months, as on August 14, 2003. But the fund's long-term track record isn't so encouraging – up just 0.70 per cent since its launch. One of the reasons though was the fund's ill-timed launch -- just before the tech boom of 2000. The limited and shrinking universe of MNC stocks could well be the other factor affecting Birla MNC's performance.

Though fund manager Anil Sarin doesn't agree. Sarin says that while many MNCs are de-listing or getting merged, new names have come up like Maruti Udyog. Moreover, open offers (as a route to de-listing) present a one-time opportunity to make profits. Birla MNC has realised these through the open offers of Cadbury, Reckitt Benckiser, Atlas Copco and Wartsila.

The MNC arms in India tend to trade at a better valuation than their global parents, especially in FMCG and healthcare sectors. Both these sectors have accounted for an average 40 per cent of Birla MNC's portfolio. But the major MNC stocks like HLL, Britannia, Pfizer and P&G Hygiene haven't done any good to the fund.

Having realised that, the fund has now shifted its focus towards mid-cap stocks like Burroughs Wellcome, Alfa Laval and Ingersoll-Rand. The passage of the Power Bill in the Parliament has helped engineering companies like ABB and Siemens to perform better recently. The MNC technology and ITES companies like i-flex and E-Serve International have also played a critical role in the fund's performance. Both these companies have gained massively in the past year. The fund manager also doesn't hesitate to keep a cash cushion--average 15 per cent--to capitalise on volatile market conditions.

The outlook for the two major MNC sectors -- pharma and FMCG -- looks bright. With the date for product patent recognition (January 2005) drawing closer, MNC pharma stocks may gain strength. Better monsoon expectations could augur well for MNC FMCG companies. In the narrow universe of MNC stocks, Birla MNC fund offers you the best option for owning a portfolio of MNC shares.