It was yet another volatile week at the equity markets. After moving up on the first two days, the markets crashed sharply wiping off all the earlier gains.
The Bombay Stock Exchange Sensex closed at 4,866 points down 2.1% over the previous week. The S&P CNX Nifty fell by 2.6% to close at 1,550 points.
A pattern seems to be emerging wherein sharp falls are registered towards the weekly close.
A peek into recent history will help us better understand how markets have behaved. The BSE Sensex grew from 4,131 points (August 22, 2003) to 5,098 points (November 4, 2003) i.e. a growth of 23.4% over 85 days.
But the southward journey has been remarkably faster. The Sensex has shed 232 points i.e. 4.6% in a span of 11 days as on November 14, 2003.
The much-anticipated correction seems to have finally set in.
Leading Equity Funds
| Diversified Equity Schemes | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | 3-Yr | 5-Yr | Incep | SD | SR |
| FRANKLIN PRIMA FUND G | 59.76 | 2.1% | 4.5% | 74.4% | 125.1% | 46.7% | 40.6% | 19.7% | 7.52% | 0.60% |
| RELIANCE GROWTH GR | 62.85 | 1.5% | 9.1% | 94.0% | 133.4% | 37.6% | 37.4% | 25.5% | 6.85% | 0.69% |
| BIRLA MIDCAP G | 17.98 | 1.5% | 4.0% | 58.1% | 78.7% | NA | NA | 72.0% | 6.15% | 0.70% |
| SUNDARAM SELECT MIDCAP | 21.15 | 1.3% | 9.0% | 82.5% | 124.0% | NA | NA | 80.1% | 6.92% | 0.70% |
| HDFC CAPITAL BLD. G | 18.15 | 1.2% | 1.7% | 58.1% | 79.5% | 17.2% | NA | 8.5% | 5.44% | 0.45% |
(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.)
Note that the weekly roundup is for the period Nov. 10 to Nov. 14. While markets were open on Saturday (November 15, 2003) for a couple of hours, we have not taken the same into account in the roundup.
The midcap rally on the first two days was responsible for the presence of a large number midcap funds in the weekly performers list. Franklin Prima Fund (2.1%) and Reliance Growth Fund (1.5%) were the leading performers. Most large cap diversified equity funds found themselves in negative terrain.
While the long-term outlook is clearly positive as indicated by various macro-economic indicators, volatile phases cannot be ruled out in the near term period.
Investors need to adopt a cautious approach to that extent.
Debt markets wore a gloomy look this week with yields rising virtually on a daily basis. The 10 year benchmark 7.27% GOI yield closed at 5.11% (November 14, 2003), 3 basis points above the previous close.
The negative sentiment can be partly attributed to expectations of a growth in credit demand from the industry leading to lower demand for government securities.
Leading Diversified Income Funds
| Income Schemes | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | 3-Yr | Incep | SD | SR |
| ESCORTS INC PLAN G | 19.31 | 0.3% | 0.5% | 3.9% | 11.5% | 12.4% | 12.7% | 0.38% | 1.03% |
| ING CAPITAL PORTFOLIO G | 11.23 | 0.2% | 0.8% | 3.0% | 6.6% | NA | 5.9% | NA | NA |
| DSP ML FLOATING RATE G | 10.26 | 0.1% | 0.4% | 2.5% | NA | NA | 2.5% | 0.03% | -4.56% |
| PRUICICI FLOATING RATE G | 10.32 | 0.1% | 0.4% | 2.5% | NA | NA | 3.2% | 0.02% | -5.22% |
| GRINDLAYS FLOATING G | 10.39 | 0.1% | 0.4% | 2.6% | NA | NA | 3.9% | 0.03% | -3.74% |
(The Sharpe Ratio is a measure of the returns offered by the fund vis-à-vis those offered by a risk-free instrument)
Floating rate funds dominated the proceedings yet again. The relevance of floating rate funds in one's portfolio has been underlined time and again by turbulent patches in the debt markets.
Escorts Income Plan (0.3%) and ING Capital Portfolio (0.2%) emerged as top performing income funds.
Going forward interest rates are likely to be "range bound" as stated by Nilesh Shah, Director & CIO, Franklin Templeton Investments at the second Investment Empowerment Meet organised by Personalfn.com.
The topic of discussion was interest rates: where they are headed and where retail investors should be investing.
Jayesh Doshi, AVP-Finance, Gujarat Ambuja came out strongly in favour of income funds but urged investors to invest in the "fund manager" rather than the fund.
On the other hand Rajiv Shastri, CIO-HDFC Mutual Fund urged investors to decide on their investment horizon risk profiles before investing.
While a very clear picture may not have emerged as regards how interest rates will move in the future, there was consensus on the view that risk-averse investors will have to look beyond traditional fixed income securities.
Balanced funds took a hit from the lackluster performances in both the equity and debt markets. Balanced funds posted negative returns across the board.
Leading Balanced Funds
| Balanced Schemes | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | 3-Yr | 5-Yr | Incep | SD | SR |
| FT INDIA INFLATION G | 11.85 | -0.2% | 0.8% | 11.5% | 16.6% | NA | NA | 12.1% | NA | NA |
| DSP ML SAVING PLUS G | 11.28 | -0.3% | 0.9% | 11.3% | NA | NA | NA | 13.3% | NA | NA |
| CANTRIPLE | 26.78 | -0.4% | -1.4% | 38.5% | 47.4% | 11.2% | 12.0% | 6.8% | 3.87% | 0.34% |
| CANGANGA | 11.52 | -0.5% | 1.7% | 49.0% | 59.6% | 4.9% | 8.5% | 3.7% | 4.89% | 0.27% |
| ALLIANCE 1995 G | 69.50 | -0.6% | -1.5% | 43.3% | 60.2% | 9.0% | 28.7% | 26.0% | 4.32% | 0.41% |
In view of the present market conditions, investors should consider investing in hybrid instruments like balanced funds and monthly income plans (MIPs).
By investing in equities with a fixed income hedge, these instruments are likely to provide much needed stability to investors.
Also as markets 'correct' at regular intervals investors can consider investing smaller amounts in equities to lower their average cost.
The systematic investment plan would serve this purpose rather efficiently.
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