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Caution: Buzzword for fund investors!
October 11, 2004 10:24 IST
It was a week of 'conflict' in equity and debt markets. Equity markets witnessed an unabated surge -- BSE Sensex up 1.74% to 5,777 points, S&P CNX Nifty up 2.47% to 1,820 points. While debt markets continued to cut a sorry state -- 7.27% 10-Yr GOI yield up 18 points to close at 6.58%. Leading Diversified Equity Funds| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 1-Yr | 3-Yr | Incep. | SD | SR | | DISCOVERY STOCK | 7.53 | 5.91% | 11.72% | 29.16% | 33.81% | -2.66% | NA | NA | | MAGNUM GLOBAL | 15.16 | 5.87% | 12.97% | 74.69% | 51.61% | 8.84% | 7.45% | 0.57% | | CANGLOBAL | 10.21 | 5.37% | 9.90% | 38.35% | 33.72% | 6.77% | 6.52% | 0.48% | | CANBONUS | 14.87 | 5.16% | 12.74% | 29.30% | 33.43% | 4.80% | 7.05% | 0.41% | | FRANKLIN INDIA PRIMA | 88.83 | 4.56% | 6.19% | 57.22% | 81.69% | 22.28% | 11.42% | 0.27% |
(Source: Credence Analytics. NAV data as on Oct. 8, 2004. Growth over 1-Yr is compounded annualized. The Sharpe Ratio is a measure of the returns offered by the fund vis-à-vis those offered by a risk-free instrument. Standard deviation highlights the element of risk associated with the fund.) Mid cap stocks were in the forefront once again this week. Funds like Discovery Stock, Magnum Global and Franklin Prima Fund benefited from the rally, as they have been for some time now. Leading diversified equity funds -- HSBC Equity (3.16%), HDFC Top 200 (2.26%) and Franklin Bluechip (0.86%) had a relatively mediocre week. Leading Income Funds| Income Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | Incep. | SD | SR | | LIC FLOATING RATE G | 10.23 | 0.09% | 0.40% | 2.12% | 2.15% | 0.06% | -3.47% | | GRINDLAYS FLOATING RATE | 10.24 | 0.09% | 0.39% | 2.30% | 2.40% | 0.04% | -3.52% | | PRU ICICI FLOATING PLAN C | 10.09 | 0.09% | 0.38% | NA | 0.87% | NA | NA | | ABN AMRO FLOATING RATE | 10.04 | 0.08% | NA | NA | 0.28% | NA | NA | | BIRLA FLOATING RATE | 10.68 | 0.08% | 0.39% | 2.24% | 5.01% | 0.06% | -2.48% |
(Source: Credence Analytics. NAV data as on Oct 08, 2004. Growth over 1-Yr is compounded annualised)
Floating rate funds were in the limelight with the rise in bond yields. Conventional long-term debt funds continued to witness erosion in value. All the leading funds were from the floating rate category with marginal difference in their performances. Debt markets continue to tread the 'volatility' course, leaving debt fund investors as concerned as ever. Investors who would have otherwise taken to equities are no doubt also a little 'concerned' with the sharp runup in equity markets. But that is not to say that your money has to be in the savings bank account. We have charted out a 3-point investment strategy for these times. Leading Balanced Funds| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 1-Yr | 3-Yr | Incep. | SD | SR | | CANTRIPLE | 32.44 | 3.12% | 4.24% | 21.18% | 27.72% | 8.02% | 3.70% | 0.31% | | CANGANGA | 11.99 | 2.65% | 6.29% | 24.35% | 28.61% | 5.50% | 5.97% | 0.39% | | HDFC PRUDENCE | 50.95 | 2.46% | 4.64% | 30.19% | 45.04% | 20.32% | 4.63% | 0.69% | | ESCORTS BAL | 23.56 | 2.23% | 6.55% | 30.94% | 33.08% | 27.74% | 5.79% | 0.42% | | PRINCIPAL BALANCED | 12.46 | 2.21% | 6.59% | 26.63% | 31.02% | 3.38% | 5.43% | 0.42% |
(Source: Credence Analytics. NAV data as on Oct 08, 2004. Growth over 1-Yr is compounded annualised)
Balanced funds had a reasonably rewarding week given the strong performance of equities, despite the slide in debt markets. Category leader – HDFC Prudence was (2.46%) among the leaders 'Proliferation' of mutual fund schemes may be a good thing for the mutual fund industry as it adds breadth and depth to the investor's options. Unfortunately, it also adds to the investor's confusion. He does not know which fund to own and which to abandon. A steady stream of mutual fund IPOs (initial public offering) with relatively newer concepts like 'dividend yield' compounds the issue further. To resolve the problem of plenty, we have tried to build an ideal mutual fund portfolio. At the end, we continue to maintain that lump sum investment at these levels in equity funds is not in the investor's interests. Systematic investment plan is the way to invest in equity markets. Investors with a low to moderate risk profile can consider SIPs in balanced funds.
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