The volatility continues. The stock markets after going downhill ended last week on a positive note, but not without some volatility.
Mutual fund investors weren't complaining! The BSE Sensex ended the week at 6,605 points, up by 162 points (2.51%). The S&P CNX Nifty closed higher by 52 points (2.63%) at 2,068 points.
With the markets showing signs of short-term volatility, it makes sense for investors to take a relook at their risk profiles and reposition their investments accordingly. A fixed deposit is one investment avenue, which can be explored to set off interest rate risk.
Alternatively, short-term floating rate funds too can be considered for the same purpose. Apart from offering higher safety levels (by way of capital preservation), these funds also offer investors the opportunity to benefit from an uptick in interest rates.
Leading Diversified Equity Funds
| Diversified Equity funds | NAV (Rs) | 1-Wk | 1-Mth | 1-Yr | 3-Yr | SD | SR |
| MAGNUM EMERGING BUS. | 14.89 | 9.57% | 5.68% | NA | NA | 7.17% | 0.86% |
| MAGNUM CONTRA | 16.36 | 7.00% | 1.49% | 86.06% | 57.43% | 6.87% | 0.53% |
| MAGNUM GLOBAL | 17.74 | 6.67% | 0.62% | 94.47% | 53.74% | 7.28% | 0.53% |
| RELIANCE GROWTH | 122.63 | 6.11% | 0.96% | 58.79% | 71.01% | 6.84% | 0.38% |
| PRU ICICI EMERGING STAR | 12.15 | 5.65% | 0.16% | NA | NA | 6.74% | 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.)
Funds from the equity diversified segment had a good week. Schemes from the SBI Mutual Fund (Magnum funds) took the top three spots. Magnum Emerging Business (9.57%) was the top performer over the week followed by Magnum Contra (7.00%). Magnum Global (6.67%) ended the week in third position.
Category leaders HDFC Top 200 (3.28%), Franklin India Bluechip (2.87%) and HSBC Equity (2.85%) all managed to post only moderate returns.
Investors continue to look at the fund manager as the one person who can make all the difference between a good fund and an average one.
We don't agree with that view; we believe that a fund manager is just that -- a manager; he marshals the resources at his disposal. Investors would nonetheless like to do their own bit of 'research' on their fund manager and we have shown how they can get a fix on him.
Leading Debt Funds
| Debt funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| ING INCOME | 16.90 | 0.39% | 0.55% | 1.95% | 0.13% | 0.61% | -0.76% |
| ESCORTS INCOME PLAN | 20.82 | 0.29% | 0.37% | 2.66% | 4.03% | 0.30% | -0.52% |
| SAHARA INCOME | 11.78 | 0.16% | 0.35% | 2.18% | 0.50% | 0.61% | -0.75% |
| SUNDARAM INCOME PLUS | 11.87 | 0.16% | 0.32% | 2.02% | 3.33% | 0.24% | -1.19% |
| LIBRA BOND | 13.38 | 0.14% | 0.08% | 9.64% | 10.13% | 2.77% | 0.07% |
The 10-year GOI yield rose marginally by just 1 basis point to end at 6.68%. Bond prices and yields share an inverse relationship, so a rise in the latter leads to a decline in the former. Given the marginal fall in bond yields, debt funds remained largely unperturbed and were in positive territory over the week. ING Income (0.39%) emerged as the leader followed by Escorts Income Plan (0.29%) and Sahara Income (0.16%).
Leading Balanced Funds
| Balanced funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| TATA BALANCED | 29.68 | 3.73% | -0.45% | 22.02% | 30.01% | 5.06% | 0.22% |
| MAGNUM BALANCED | 18.90 | 3.50% | 0.96% | NA | NA | 1.92% | 0.88% |
| KOTAK BALANCE | 17.76 | 3.15% | 0.23% | 24.26% | 36.39% | 5.89% | 0.25% |
| HDFC PRUDENCE | 60.15 | 3.04% | -0.02% | 19.31% | 29.87% | 4.40% | 0.27% |
| ESCORTS BAL | 27.02 | 2.97% | -1.75% | 16.31% | 24.48% | 5.25% | 0.10% |
Balanced funds, like their diversified equity counterparts did reasonably well this week. Tata Balanced (3.73%) came out tops with Magnum Balanced (3.50%) and Kotak Balanced (3.15%) trailing it.
The volatility in equity markets has been an eye opener of sorts for 'punters' who think that the markets always present an opportunity to make a quick buck. Entering stock markets without being equipped with adequate knowledge can spell disaster for any lay investor.
In our view, mutual funds offer uninformed investors the benefit of a fund manager's expertise coupled with diversification across equity and debt markets.
A new financial year has dawned and the latest budget has enough meat in it for the mutual fund investor.
You can now invest up to Rs 100,000 in tax-saving funds (ELSS). As investing this large an amount at one go will be challenging for most retail investors, they can look at investing in tax-saving funds through the Systematic Investment Plan (SIP).
Learn how the Union Budget 2005-06 impacts you. For the latest issue of Money Simplified absolutely FREE!Click here!
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