Markets were largely range-bound last week with the benchmark indices posting modest gains. The BSE Sensex rose by 0.12 per cent to close at 4,951 points while the S&P CNX Nifty appreciated by 0.39 per cent to end at 1,559 points.
The outcry over the transaction tax proposed in the budget refused to settle down and markets seemed to be on a directionless journey.
Leading Diversified Equity Funds
| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 1-year | 3-year | Incep. | SD | SR |
| DISCOVERY STOCK | 5.66 | 6.59% | 5.01% | 27.48% | 12.19% | -5.60% | NA | NA |
| SUNDARAM SELECT MIDCAP | 23.38 | 6.57% | 8.75% | 71.53% | NA | 54.98% | 8.24% | 0.41% |
| TATA GROWTH FUND BONUS | 10.10 | 4.79% | 6.88% | NA | NA | -18.90% | NA | NA |
| BOINANZA EXCL G | 11.62 | 4.40% | 5.83% | 13.24% | 29.60% | 6.92% | 9.53% | 0.15% |
| CANBONUS | 11.70 | 4.37% | 8.23% | 31.76% | 15.82% | 2.91% | 8.67% | 0.20% |
(NAV data as on July 16, 2004. Growth over 1-year 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.)
Yet again funds which invest predominantly in mid-cap stocks dominated the proceedings. Discovery Stock (6.59%) was the weekly top performer, however the fund's performance over a longer period is not encouraging to say the least.
Sundaram Select Midcap (6.57%) came in at second position while Tata Growth Fund (4.79%) occupied the third slot. It was a poor week for category leaders HDFC Top 200 (0.40%) and Franklin India Bluechip (0.38%).
Asset management companies (AMC) have been doing their bit to keep investor interest alive by launching innovative funds. Fund of Funds (FoF) is an investment vehicle which has been in the news in the recent times.
Simply put an FoF invests in more than one existing mutual fund thereby giving investors the opportunity to be invested in various funds despite holding units in a single scheme.
Effectively it takes diversification to a new level. Notwithstanding the advantages associated with an FoF, the cost of investing in one must be closely studied.
Investors are expected to bear expenses not only for the FoF they invest in, but also for the funds which the FoF further invests in, thereby making it a rather costly proposition.
These expenses eat into the investors' returns thereby putting the FoF's attractiveness under doubt. As is the case in most instances, the decision to invest in an FoF can only be justified by its performance.
Leading Income Funds
| Income Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | Incep. | SD | SR |
| SUNDARAM INC. PLUS G | 11.57 | 0.18% | 0.20% | 1.41% | 4.21% | 7.60% | 0.95% | 0.07% |
| BOB INCOME G | 11.50 | 0.11% | 0.35% | 3.56% | 6.43% | 6.09% | 0.59% | 0.04% |
| DEUTSCHE FLOAT. RATE G | 10.34 | 0.09% | 0.38% | 2.24% | NA | 3.36% | 0.02% | -8.14% |
| GRINDLAYS FLOAT. RATE | 10.13 | 0.09% | 0.36% | NA | NA | 1.30% | 0.04% | -3.24% |
| PRU ICICI FLOAT. RATE G | 10.65 | 0.08% | 0.36% | 2.28% | 4.85% | 4.91% | 0.03% | -4.82% |
(NAV data as on July 16, 2004, Growth over 1-year 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)
The debt markets continued to be a source of worry for investors. The benchmark 7.37% 2014 GOI yield closed at 5.96% (July 16, 2004), a whopping 21 basis points above the previous weekly close. Uncertainty over the transaction tax and high inflation figures played their part in pushing up yields.
Rising yields translate into falling bond prices and lower net asset values for income fund investors.
The state of debt markets was perhaps best captured by Mr. Suyash Chaudhary, fund manager, Standard Chartered Mutual Fund at Personalfn's 5th Investment Empowerment Programme when he remarked that the interest rate environment in India was not conducive for long-term bond funds.
However it is far from curtains for the income funds segment; floating rate funds and funds which invest in lower rated paper can prove to be smart bargains even at this stage.
Sundaram Income Plus (0.18%) a fund which invests largely in low rated paper was the weekly topper, and expectedly floating rate funds came to the fore as well.
Leading Balanced Funds
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 1-year | 3-year | Incep. | SD | SR |
| TATA BALANCED APP | 21.29 | 3.28% | 5.65% | 41.19% | 21.91% | 13.70% | NA | NA |
| CANGANGA | 10.42 | 2.66% | 3.89% | 35.42% | 17.61% | 4.04% | 7.35% | 0.21% |
| CANTRIPLE | 27.60 | 2.64% | 3.76% | 24.44% | 17.19% | 6.70% | 5.93% | 0.20% |
| MAGNUM BALANCE | 13.36 | 2.61% | 6.20% | 54.53% | 20.46% | 13.93% | 6.38% | 0.37% |
| PRU ICICI BAL G | 15.22 | 2.42% | 5.04% | 34.33% | 20.96% | 9.98% | 5.51% | 0.31% |
(NAV data as on July 16, 2004. Growth over 1-year is compounded annualised)
Rising equity markets and falling debt markets implied that it was a mixed week for the balanced funds segment. The performance was range bound with the top performers ranging from 2.42% to 3.28%.
Tata Balanced (3.28%) was the weekly topper followed by Canganga (2.66%). Magnum Balanced (2.61%) kept up its impressive performance by making it to the top weekly performers list yet again. Category leader HDFC Prudence (1.31%) had an ordinary week.
How the markets will behave from this stage onwards is anybody's guess. In all fairness, timing markets is not an activity to be indulged in by retail investors. Having said that, these are attractive levels to start making investments albeit in small amounts.
We recommend that investors adopt the systematic investment plan (SIP) route at this stage. An SIP can certainly work to the investor's advantage over a period of time, making him immune to the market's idiosyncrasies.
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