Morgan Stanley– Invest in sensex @9200

Morgan Stanley Growth fund (Rs 34.70) was launched in 1994. Since then the fund manager has done little to be evaluated with his Indian counterparts. While during this period the better known Indian mutual funds like Reliance Growth and Franklin India Prima fund have multiplied wealth by over 15 times Morgan Stanley has done so by only 4 times.

The fund comes up for redemption in 2008 and that makes it more interesting. because redemptions will be on NAV prices. SO an investor buying the fund units today will see a notional appreciation of 20.83% in his portfolio which will be realized in 2008. The NAV (Rs 41.99) is at premium of 20.83% to the market price.(Rs 34.70). This means that a person buying into Morgan Stanley Growth fund would be getting into an index level of 9200.The fund units are normally traded in the exchanges and can be bought like any other stock.

The key highlights for this fund are:

• Available at a significant discount to its NAV.
• The discount cuts down the downside risk for an investor
• Fund holds a portfolio of excellent blue chips.
• Investment into MSGF is recommended for any large cap investor who wishes to hold a diversified large cap portfolio.
• Presently the fund is very aggressively invested holding only about 4% in cash and debt.
• The portfolio is well diversified across various sectors.

Portfolio as on June 30, 2006

BHEL

Siemens

HLL

ABB

ITC

Infosys Technologies

Hindustan Construction

HDFC Bank

HDFC

M&M

Cipla

ACC

HCL technologies

Wipro

PNB

Aban Lloyd

Concor

NTPC

Hotel Leela

UTI Bank

Aventis

Gammon India

Rico Auto

Marico

Pantaloon Retail

NDTV

             Sector                                 Weightage (%)

 Basic/Engineering                       22.44

 FMCG                                            12.85

 Financial Services                      12.64

 Technology                                   11.97

 Construction                                 9.64

 Automobile                                   5.81

 Services                                         5.76

 Health Care                                  5.30

 Energy                                           4.41

 Metals & Metal Products         1.61

 Textiles                                          1.28

 Chemicals                                     0.85

 Automobile                                   5.81

 Services                                         5.76

Recommendation: Morgan Stanley is a classic case where investors would be betting more on the fund redemption date rather then the fund manager’s investing skills. The Sharpe ratio (0.39) for the fund is well below the sector leaders and the annualized return since inception is also quite inferior when compared to the better boys in business. Never the less the unit offers excellent scope for an investor with a two year perspective and he could do well by shifting more then 20% of his large cap portfolio into this stock.