With the markets setting a new all-time high just about every day, discerning investors are getting increasingly jittery at these levels. For quite some time now some fund managers have been speaking of a correction of some sort, but the euphoria in the markets seems to have ignored their word of caution.

The BSE Sensex closed the week at 8,381 points, up 3.98%, while the S&P CNX Nifty appreciated 3.74% to close at 2,552 points. The CNX Midcap rose 2.68% to close at 3,863 points.

With equity markets on the ascent, it was a good week for investors from the diversified equity funds segment. Canemerging Equities (8.11%) towered head and shoulders above its peers.

JM Equity (6.48%) and Escorts Growth (6.00%) occupied second and third positions respectively. Category leaders HSBC Equity (5.06%), HDFC [Get Quote] Top 200 (3.70%) and Franklin India Bluechip (3.34%) delivered impressive performances as well.

Mid cap majors - Sundaram Select Midcap (2.94%), Magnum Global (2.74%) and Franklin India Prima (1.61%) had a rather subdued week vis-�-vis their predominantly large cap peers.

Bond yields inched southwards for the third week in a row. The 10-Yr benchmark 7.38% GOI yield closed at 7.01% (September 16, 2005), 1 basis point below the previous weekly close. Bond yields and prices share an inverse relation with falling yields translating into higher bond prices and NAV (net asset value) for debt fund investors.

UTI Bond (0.36%) emerged as the top performing debt fund followed by Deutsche Premier Bond (0.26%). Principal Income (0.19%) and Magnum Income (0.19%) also featured in the list.

As concerns of rising interest rates loom large, investors need to look beyond the traditional long-term debt fund. While we have suggested floating rate funds in the past to counter the rising interest rate scenario, there is another debt fund category investors can explore � dynamic debt funds.

These funds are actively managed across the debt spectrum in corporate bonds and government securities (G-secs), unlike traditional long-term debt funds that are largely invested in corporate bonds, with smaller allocations to G-secs. This flexibility gives the dynamic debt fund manager a little more leeway to counter interest rate risk and clock a relatively higher return.

JM Balanced (4.02%) surfaced as the week's top performing balanced fund. Escorts Balanced (3.89%) and Canbalance (3.74%) came in at second and third positions respectively. Category leader HDFC Prudence (2.69%) had a profitable week.

As 'new fund offers' in thematic/niche funds continue to mobilise enormous amounts of money, a question investors need to ask themselves is whether they are investing in the right funds. One area where we are certain investors are grossly under-invested at this stage is in tax-saving funds (ELSS).

With the investment limit in these funds being raised to Rs 100,000 risk-taking investors can and should up their investments in these funds significantly.

To know how parents should go about securing their children's future and the role women can play in the same, download your free copy of the Money Simplified.