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'Electioned' markets!
May 04, 2004 11:03 IST
The latest exit polls indicated a hung Parliament and markets did not react too well to the possibility of an uncertain political environment. The BSE Sensex shed 4.57 per cent during the week to close at 5,655 points, while the S&P CNX Nifty fell by 5.07 per cent to close at 1,796 points. (The Sensex was, however, up 76 points in early deals on Tuesday) Leading Diversified Equity Funds| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | Incep. | SD | SR | | PRINCIPAL GLOBAL OPP G | 10.04 | -1.12% | NA | NA | NA | -1.26% | NA | NA | | CHOLA GROWTH G | 13.33 | -1.26% | 1.29% | 19.34% | 121.50% | 46.80% | 6.56% | 0.44% | | UTI THEMATIC MID CAP | 10.13 | -1.36% | NA | NA | NA | -0.30% | NA | NA | | TAURUS STARSHARE | 11.45 | -1.97% | 5.14% | 11.06% | 99.10% | 0.65% | 8.65% | 0.26% | | IL&FS DYNAMIC G | 15.16 | -2.70% | 7.98% | 26.44% | NA | 55.97% | 7.82% | 0.71% |
(NAV data as on Apr 30, 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.) Diversified equity funds across board offered negative returns this week. Principal Global Opportunities Fund (-1.12 per cent) suffered the least followed by Chola Growth (-1.26 per cent). Category leaders HDFC Top 200 (-3.83 per cent) and Franklin India Bluechip (-4.85 per cent) had a poor week as well. Most publications and fund research houses do a mutual fund ranking at periodic intervals. Of course, they have different parameters (like absolute return, risk-adjusted return, volatility) to rank the funds, which throw up different sets of results. While there is nothing wrong with mutual fund rankings per se, the manner in which such rankings are allotted and presented leaves a lot to be desired. Returns inevitably are given more attention and important areas like fund management style and investment processes are virtually ignored. Again schemes like child plans which have a lock-in period are compared with conventional balanced schemes, which is akin to comparing oranges and apples. Monthly income plans are compared across board without realising that some of them have a higher equity cap say 30 per cent vis-à-vis other with a 10 per cent equity cap. The next time you see a fund winning some award, make sure it was in the 'right' company. Leading Income Funds| Income Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | Incep. | SD | SR | | TEMPLETON FLOAT LTP G | 11.48 | 0.11% | 0.45% | 2.47% | 5.30% | 6.36% | 0.11% | -0.41% | | FRANKLIN INTERNATIONAL FUND | 9.40 | 0.10% | -0.92% | -0.97% | -5.52% | -4.67% | 1.16% | -0.82% | | BOB INCOME G | 11.47 | 0.09% | 0.49% | 4.11% | 7.16% | 6.61% | 0.57% | 0.06% | | BIRLA FLOATING RATE LTP G | 10.47 | 0.09% | 0.39% | 2.32% | NA | 4.69% | 0.07% | -1.79% | | DEUTSCHE FLOATING RATE G | 10.24 | 0.09% | 0.40% | 2.25% | NA | 2.38% | 0.03% | -6.24% |
(NAV data as on April 30, 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)
Debt markets felt the "election" heat as well and yields hardened. The benchmark 10-Yr 7.37% 2014 GOI yield closed at 5.12% (April 30, 2004), 5 basis points above the previous close. Yields and bond prices share an inverse relation, with higher yields implying lower bond prices. For the second week in a row, floating rate funds made it to the top performers list. Templeton Float (0.11%) emerged as the top performer followed closely by Franklin International Fund (0.10%). Leading Balanced Funds| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | Incep. | SD | SR | | FT INDIA INFLATION G | 12.18 | -0.45% | 0.06% | 3.07% | 15.99% | 10.76% | 0.93% | 0.38% | | FT CONSERVATIVE G | 13.75 | -1.04% | 1.29% | 7.56% | 33.63% | 17.36% | 1.88% | 0.49% | | LIC BALANCE G | 25.18 | -1.33% | 4.92% | 10.02% | 47.97% | 5.63% | 4.00% | 0.29% | | UTI VARIABLE INV. ILP | 12.44 | -1.61% | 0.73% | 5.65% | 45.85% | 24.45% | 3.69% | 0.35% | | HDFC PRUDENCE G | 47.75 | -1.64% | 5.06% | 17.13% | 85.47% | 20.51% | 4.33% | 0.61% |
(NAV data as on April 30, 2004. Growth over 1-Yr is compounded annualised)
A bad week at the equity markets implied that balanced funds had a mediocre week as well. FT India Inflation (-0.45 per cent) surfaced as top weekly performer in the balanced funds category followed by FT Conservative (-1.04 per cent). It has been a tough week for investors and the likelihood of a knee-jerk reaction like a distress sale looms large. Let's see what fund managers with whom we have interacted over a period of time feel about investing in equities. Prashant Jain, Head-Equities, HDFC Mutual Fund, says: "Investors should invest that portion of their wealth in equities which they do not need for 2-5 years and on which they can tolerate a reasonable depreciation." Chetan Sehgal, Director Research, Franklin Templeton, believes, "Investors must look to maximize their returns over the long term and equity markets have traditionally been the best place to maximize wealth over the long term." Anup Maheshwari, Head-Equities, DSP ML Mutual Fund, opines, "There will always be periods of volatility in both fixed income and the equity markets and the best way to ride out such volatility is to continue to remain invested and avoid timing the markets." The message is loud and clear. These individuals at different points in time have consistently maintained that equity markets are about long-term investing. A week like the present one is an aberration which will get evened out if you stick to the ideal investment horizon.
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