There has been some relief for investors this week as mutual funds registered positive returns despite markets being south-bound for the second week in a row.
The BSE Sensex posted a loss of 0.74% to close at 5,065 points, while the S&P CNX Nifty lost 0.50% to end the week at 1,590 points. The week was marked by volatile phases which are concealed in the minor losses. Inflation played the spoilsport to perfection.
Leading Diversified Equity Funds
| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 1-Yr | 3-Yr | Incep. | SD | SR |
| DISCOVERY STOCK | 6.14 | 1.99% | 6.78% | 17.18% | 17.82% | -4.74% | NA | NA |
| UTI - DYNAMIC EQUITY G | 15.10 | 1.96% | 7.09% | NA | NA | 55.35% | 11.09% | 0.37% |
| TAURUS STARSHARE | 12.16 | 1.93% | 9.65% | 38.03% | 35.88% | 1.21% | 8.85% | 0.33% |
| BIRLA MIDCAP G | 22.84 | 1.78% | 3.96% | 53.49% | NA | 56.32% | 8.19% | 0.44% |
| BOINANZA EXCL G | 12.86 | 1.58% | 8.07% | 7.72% | 32.94% | 8.09% | 10.04% | 0.21% |
Not all mutual funds declared their NAVs on August 20, 2004 as August 19, 2004 was a holiday in a lot of fund houses. The tables have been prepared with the data available with us as on August 23, 2004.
Discovery Stock (1.99%) emerged as the top performing fund from the diversified equity fund segment, followed by UTI-Dynamic Equity (1.96%) and Taurus Starshare (1.93%). Funds investing in stocks of the mid-cap variety had a good week as well, e.g. Birla Midcap (1.78%), UTI Thematic Midcap (1.44%) and Franklin India Prima Plus (1.20%).
Category leaders HDFC Top 200 (-0.52%) had a poor week, while Franklin India Bluechip (0.30%) had an ordinary one.
We at Personalfn have been advocating investors to invest using the systematic investment plan (SIP) route for a while now.
Retail investors have this rather uncanny ability of entering the markets at the wrong levels. They can rid themselves of the "timing" problem for good with the SIP route.
However there are other reasons like rupee cost averaging and compounded returns which also contribute to making it a sound strategy.
Leading Income Funds
| Income Funds | NAV (Rs) | 1-Wk | 1-Mth | 1-Yr | 3-Yr | Incep. | SD | SR |
| LIBRA BOND G | 12.11 | 0.65% | -0.61% | 4.28% | 6.62% | 6.62% | 1.44% | -0.14% |
| DSP ML BOND G | 22.14 | 0.62% | -1.79% | 0.56% | 8.87% | 11.42% | 1.20% | -0.01% |
| BIRLA INCOME PLUS B | 27.26 | 0.31% | -1.80% | 0.75% | 9.16% | 12.76% | 1.25% | -0.01% |
| CHOLA TRIPLE ACE G | 22.42 | 0.24% | -0.33% | 2.12% | 8.63% | 11.37% | 1.28% | -0.09% |
| ESCORTS INCOME PLAN G | 20.16 | 0.21% | -0.02% | 6.31% | 10.81% | 11.83% | 0.52% | 0.45% |
(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.)
Data released this week quoted inflation figures at a record high of 7.96% and the benchmark 7.37% 2014 GOI yield closed at 6.55% (August 21, 2004). Conventional income funds dominated the proceedings this week. Libra Bond (0.65%) topped the income funds category this week followed by DSP ML Bond (0.62%).
Fixed income investors are worst affected in times of rising inflation. However there could be good news in store at least for investors in the small savings variety which is immensely popular.
The Rakesh Mohan Committee recommends amongst other proposals that interest rates on small savings schemes should be linked to yields on government securities. Hence investors would benefit in a rising rate scenario like the present one by being granted higher interest rates.
Leading Balanced Funds
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 1-Yr | 3-Yr | Incep. | SD | SR |
| KOTAK BALANCE | 13.69 | 0.40% | 4.20% | 29.28% | 22.91% | 11.88% | 6.28% | 0.30% |
| TATA BALANCED APP | 21.99 | 0.22% | 2.69% | 32.50% | 24.18% | 13.97% | 6.31% | 0.34% |
| SUNDARAM BAL G | 16.70 | 0.22% | 2.64% | 25.76% | 23.76% | 12.71% | 5.21% | 0.32% |
| HDFC BALANCE G | 16.29 | 0.17% | 1.97% | 24.06% | 21.52% | 13.43% | 5.60% | 0.27% |
| PRU ICICI BAL G | 15.59 | 0.16% | 1.96% | 27.47% | 22.39% | 10.32% | 5.87% | 0.32% |
Balanced funds managed to deliver positive returns as well. Kotak Balance (0.40%) surfaced as the week's top balanced fund, while the second position was shared by Tata Balanced (0.22%) and Sundaram Balanced (0.22%). Category leader HDFC Prudence (-0.14%) had a mediocre week.
With the markets hitting a roadblock, this is clearly a testing time for investors. The need to stay focused on your investment objectives and not get tempted from quarters which promise miracles like 'doubling your money in three years' is crucial.
Investors across age groups have different risk appetites and their investment mixes should reflect the same. A risk-averse investor stays risk-averse even in times when the equity markets look attractive.
A smart investment opportunity would qualify as one only if it fits into your profile. The 'one size fits all' approach doesn't work with investments.
Steer clear of investment advice that exhorts you to jump into equities irrespective of your profile; it's a definite recipe for disaster.
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