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MFs: Look before you leap
March 15, 2004 11:21 IST
It was a bad week at the markets with the BSE Sensex posting a loss of 3.06 per cent to close at 5,700 points while the S&P CNX Nifty closed at 1,812 points (down 2.99 per cent). The fall in the market was attributed to a variety of reasons ranging from liquidity concerns for advance tax payments to negative positions in the derivatives segment. The week had begun on a positive note following the IPO euphoria but the situation changed rather quickly. Yet again keeping with the trend in recent times, a strong performance on the last day (up 50 points) was the saving grace. Leading Diversified Equity Funds| Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | 3-Yr | Incep. | SD | SR | | GIC FORTUNE 94 | 14.63 | -0.20% | 0.07% | 41.90% | 120.00% | 38.10% | 4.95% | 7.80% | 0.40% | | CHOLA GROWTH G | 13.22 | -0.34% | 1.61% | 45.43% | 120.33% | NA | 49.43% | 6.25% | 0.46% | | CANEQUITY DIVERSIFIED | 13.16 | -0.38% | -2.88% | 31.34% | NA | NA | 31.34% | 7.22% | 0.47% | | BIRLA DIV YIELD G | 21.58 | -0.64% | -2.26% | 40.68% | 119.09% | NA | 107.56% | 6.57% | 1.00% | | SUNDARAM SEL. MID. | 23.82 | -0.67% | 2.04% | 44.19% | 135.59% | NA | 72.14% | 7.29% | 0.61% |
(NAV data as on Mar 12, 2004. Growth over 1-Yr is compounded annualised)
(Standard deviation indicates by how much the values have deviated from the mean of the values. It measures by how much the investor has diverged from the mean return either upwards or downwards. It highlights the element of risk associated with the fund.) Equity funds across board found themselves in the negative terrain. GIC Fortune 94 (-0.20 per cent) and Chola Growth (-0.34 per cent) were among the funds that suffered the least. Category leaders HDFC Top 200 (-2.60 per cent) and Franklin India Bluechip (-3.16 per cent) were not spared either. In demanding times like these investing in equity funds can be a tough proposition. While the view that equities tend to be the better performing asset class over a longer horizon has been endorsed by many experts and fund managers, the discipline to hold on to investments has often been found lacking in investors. Equity linked savings schemes (ELSS) is an asset class which enforces this discipline through the 3-Yr lock-in period. Interestingly investments up to Rs 10,000 in ELSS offer a tax benefit under Section 88 of the Income Tax Act; a unique case of market linked returns coupled with tax concessions. ELSS: the long timers…| ELSS | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | 3-Yr | Incep. | SD | SR | | HDFC TAX 2000 G | 31.37 | -0.91% | -0.80% | 47.81% | 133.01% | 50.73% | 43.07% | 6.20% | 0.64% | | BIRLA TAX 98 | 71.52 | -1.11% | -3.30% | 43.64% | 141.30% | 42.63% | 39.29% | 7.84% | 0.47% | | MAGNUM TAXGAIN | 24.61 | -1.44% | 1.23% | 63.69% | 157.30% | 25.91% | 11.79% | 8.61% | 0.36% | | SUNDARAM TAX | 16.38 | -1.46% | -1.40% | 29.82% | 92.47% | 29.00% | 12.14% | 5.70% | 0.40% | | ALLIANCE TAX 96 | 113.39 | -1.54% | 0.85% | 56.63% | 134.98% | 37.00% | 44.45% | 6.89% | 0.45% |
(NAV data as on March 12, 2004, Growth over 1-Yr is compounded annualised)
(The Sharpe Ratio is a measure of the returns offered by the fund vis-à-vis those offered by a risk-free instrument)
ELSS have been no laggards as far as performance are concerned. The top performing schemes have ranged from 25.91 per cent to 50.73 per cent during the 3-Yr lock-in period. Investors who chose to be invested in these schemes have been adequately compensated for their patience. It was another good week at the debt markets as yields continued to inch downwards. Markets were flush with liquidity and the much-hyped market stabilisation bonds did not hit the markets either. The 10-Yr benchmark 7.37 per cent GOI yield closed at 5.21 per cent (March 12, 2004), 4 basis points below the previous close. Leading Income Funds| Income Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | 3-Yr | Incep. | SD | SR | | DEUTSCHE BOND IP G | 11.12 | 0.70% | 1.06% | 3.49% | 13.77% | NA | 2.12% | NA | NA | | DEUTSCHE DYN. BOND FUND | 10.00 | 0.69% | 0.90% | NA | NA | NA | 0.19% | 1.44% | -0.46% | | JM INCOME G | 26.49 | 0.69% | 0.87% | 2.76% | 10.10% | 13.39% | 11.87% | 1.44% | 0.22% | | DEUTSCHE PREMIER BOND G | 11.03 | 0.68% | 0.99% | 3.10% | 12.92% | NA | 1.85% | 1.25% | 0.43% | | RELIANCE INC GR | 20.42 | 0.64% | 0.95% | 3.04% | 10.41% | 12.09% | 12.27% | 1.33% | 0.21% |
(NAV data as on Mar 12, 2004. Growth over 1-Yr is compounded annualised)
Income funds from plain vanilla category dominated the proceedings. Deutsche Bond (0.70 per cent) topped the charts followed by Deutsche Dynamic Bond (0.69 per cent). It was a good week for income fund investors from the Deutsche AMC. During the week, Personalfn organised an investment empowerment programme wherein distinguished speakers expressed their views on the stock markets and the Indian economy. Binay Chandgothia (Head-Fixed Income, Principal AMC) endorsed the view that the economy was indeed shining and quoted growth rate of national income as one of the main reasons. The latest available figure was about 8.4 per cent, which is significantly higher than the previous year's figure. Ajit Dayal Deputy CIO, Hansberger Global Investors Inc. and the co-founder and Chairman of Quantum Information Services Ltd. put forth a rather contrary yet insightful view. He reminded investors that while the economy was doing well, the irrational exuberance in the equity markets was triggered by FII inflows, which could be fickle in nature. Hardening interest rates in the United States could divert the flows there. Investors could do well to temper their expectations and not expect 'plus' markets in 2004. He urged investors to diversify to the extent possible and use new provisions related to foreign exchange to the maximum. The final word was 'look before you leap.'
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