September 2004 turned out to be a rewarding month for mutual fund investors. The equity markets were on a roll and rose sharply during the month. The BSE Sensex posted a monthly gain of 6.47%, while the S&P CNX Nifty rose by 5.90%.
Leading Diversified Equity Funds
| Diversified Equity Funds | NAV (Rs) | 1-Mth | 1-Yr | 3-Yr | Incep. | SD | SR |
| PRU ICICI DYNAMIC PLAN | 20.74 | 10.67% | 25.51% | NA | 46.86% | 7.90% | 0.37% |
| UTI GRANDMASTER | 18.20 | 9.51% | 49.17% | 40.00% | 6.90% | 7.41% | 0.44% |
| CANBONUS | 14.00 | 9.12% | 29.03% | 30.91% | 4.31% | 7.67% | 0.37% |
| BONANZA EXCL. GROWTH | 14.75 | 8.86% | 15.65% | 42.76% | 9.66% | 9.07% | 0.32% |
| CANEQUITY DIVERSIFIED | 14.27 | 8.68% | 34.62% | NA | 40.57% | 9.46% | 0.22% |
(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.)
PruICICI Dynamic Plan (10.67%) emerged as the monthly topper, followed by UTI Grandmaster (9.51%). Funds investing predominantly in stocks from the midcap segment topped the charts for a better part of the month. The attention grabbed by these midcap funds notwithstanding, investors must realise the inherent risks associated with such investments.
Our view on midcap funds - investors with an appetite for risk can consider investing in them, but only after building a mutual fund portfolio with a fair share of large cap funds.
Funds with a fluid investment style i.e. Tata Equity Opportunities ( 8.35%) and Magnum Global (8.10%) also raked in attractive returns.
It was an ordinary month for the category leaders from the equity funds segment - HDFC Top 200 (6.38%), Franklin India Bluechip (5.98%) and HSBC Equity (5.87%).
Leading Income Funds
| Income Funds | NAV (Rs) | 1-Mth | 1-Yr | 3-Yr | Incep. | SD | SR |
| PRU ICICI CAUTIOUS PLAN (FOF) | 10.37 | 1.03% | NA | NA | 1.62% | 0.90% | -0.59% |
| RELIANCE INCOME FUND | 20.48 | 0.61% | 2.06% | 9.61% | 11.26% | 1.20% | 0.02% |
| UTI BOND FUND | 18.65 | 0.59% | 1.05% | 8.11% | 10.29% | 0.86% | -0.14% |
| DEUTSCHE PREMIER BOND | 11.05 | 0.50% | 1.86% | NA | 1.45% | 1.21% | 0.10% |
| DSP-ML FLOATING RATE FUND | 10.69 | 0.48% | 4.87% | NA | 4.95% | 0.03% | -4.34% |
Inflation proved to be the bugbear for debt markets. Markets didn't react too kindly to the rising inflation figures and experienced bouts of intense volatility. The volatility could be gauged from the benchmark 7.37% 2014 GOI yield which oscillated sharply on a week-on-week basis.
A motley mix made it to the top performers list. PruICICI Cautious Plan (1.03%), a fund of funds investing in income funds emerged as the monthly topper followed by Reliance Income Fund (0.61%). DSP ML Floating Rate Fund (0.48%) made its presence felt as well.
Investors especially the risk-averse ones would feel inclined towards investing in fixed deposits in such times. Also, institutions accepting deposits have launched innovative products to curtail the downsides associated with investing in fixed deposits.
Even investors with an appetite for risk should consider short-tenured deposits as options for parking funds till better investment opportunities emerge.
Leading Balanced Funds
| Balanced Funds | NAV (Rs) | 1-Mth | 1-Yr | 3-Yr | Incep. | SD | SR |
| BOB BALANCED FUND | 12.61 | 5.70% | 25.72% | NA | 25.60% | 7.05% | 0.22% |
| SUNDARAM BALANCED FUND | 18.20 | 5.57% | 29.02% | 30.66% | 14.64% | 4.83% | 0.44% |
| PRU ICICI BALANCED FUND | 16.87 | 5.24% | 25.90% | 29.38% | 11.86% | 5.33% | 0.43% |
| CANGANGA | 11.55 | 5.19% | 26.16% | 27.27% | 5.10% | 7.09% | 0.34% |
| TATA BALANCE FUND | 23.85 | 5.03% | 31.96% | 32.71% | 14.84% | 5.38% | 0.47% |
Balanced funds drew from the strong surge in equity markets. The top performing funds ranged from 5.03% to 5.70% during the month. BOB Balanced (5.70%) surfaced as the leader in the balanced funds segment followed by Sundaram Balanced (5.57%). Category leader HDFC Prudence (4.16%) pitched in a modest performance.
With equity markets on the rise, many investors would be tempted to consider getting invested in equities and equity oriented mutual funds.
There are a host of wrong reasons for investing in equities, and an investment driven solely by market conditions would also qualify as one. Investors would do well to stick to investments that are in tune with their risk appetite.
Our advice: exercise caution and don't get carried away by the exuberance in the markets.
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