Volatile. The word best sums up how equity markets behaved this week. Both the BSE Sensex and S&P CNX Nifty touched record highs. The BSE Sensex closed the week at 7,781 points (up 0.17%); while the S&P CNX Nifty posted a weekly gain of 0.91% to end at 2,383 points. The CNX Midcap rose by 0.64% and closed at 3,630 points.
Leading Diversified Equity Funds
| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| MAGNUM EMERGING BUS. | 22.03 | 4.66% | 16.07% | 66.89% | - | 6.30% | 1.19% |
| MAGNUM GLOBAL | 18.28 | 4.28% | 12.29% | 39.92% | 119.26% | 8.04% | 0.68% |
| MAGNUM CONTRA | 21.60 | 3.50% | 12.21% | - | - | 8.70% | 0.61% |
| UTI THEMATIC MID CAP | 17.02 | 3.47% | 9.81% | 27.49% | 77.76% | 6.53% | 0.53% |
| ALLIANCE EQUITY | 108.27 | 3.37% | 10.21% | 31.81% | 93.62% | 8.33% | 0.50% |
(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.)
Magnum funds were in the limelight in the diversified equity funds category, which is not something new if you have been tracking their performances even cursorily. Magnum Emerging Business (4.66%) led the rankings followed by Magnum Global Fund (4.28%).
Clearly healthy mid cap allocations was the primary reason for the strong surge in equity funds over the past few weeks.
Leading mid cap majors -- Franklin Prima Fund (1.93%) and Sundaram Select Midcap (2.23%) had an average week.
Category leaders were hit by the volatility in the large cap stocks. This is apparent from their subdued performances -- Franklin Bluechip (0.77%), HSBC Equity (0.80%) and HDFC Top 200 (0.58%).
Fund houses continued to shower investors with new fund offers. This week Personalfn profiled Reliance Tax Saver (ELSS) Fund. The fund is a tax-saving fund whose primary objective is to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments.
We believe the fund will be aggressively managed (like its fund house peers) and is likely to be a typical high risk -- high return investment proposition.
Leading Debt Funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| PRUICICI INC | 20.09 | 0.16% | 0.70% | 2.35% | 4.88% | 0.67% | -0.60% |
| CHOLA FREEDOM INC | 10.79 | 0.13% | 0.53% | 2.09% | 4.11% | NA | NA |
| DEUTSCHE PREMIER | 11.62 | 0.12% | 1.03% | 4.40% | 6.49% | 0.81% | -0.25% |
| KOTAK FLEXI DEBT | 10.44 | 0.11% | 0.49% | 2.99% | - | 0.03% | -1.44% |
| PRUICICI LONGTERM | 14.20 | 0.10% | 0.45% | 5.24% | 14.57% | 0.75% | 0.20% |
The 10-year benchmark 7.38% GOI yield closed at 7.06% (August 19, 2005), 1 basis point above the previous weekly close. Bond yields and prices share an inverse relation with rising yields translating into lower bond prices and net asset values (NAV) for debt fund investors.
PruICICI Income (0.16%) led the ranking over the last week followed by Chola Freedom (0.13%). Deutsche Premier Bond (0.12%) came in a close third.
Leading Balanced Funds
| Balanced Funds | NAV (Rs) | 1-Wk | 6-Mth | 1-year | 3-year | SD | SR |
| MAGNUM BALANCED | 23.42 | 2.23% | 27.63% | - | - | 6.26% | 0.55% |
| ALLIANCE 1995 | 121.99 | 2.18% | 19.39% | 52.66% | 38.94% | 6.05% | 0.41% |
| SUNDARAM BAL | 22.77 | 2.01% | 12.19% | 36.85% | 31.60% | 4.81% | 0.37% |
| PRUICICI BAL | 23.89 | 1.96% | 21.83% | 52.17% | 37.80% | 5.73% | 0.41% |
| ING BAL | 14.06 | 1.81% | 21.94% | 53.66% | 32.24% | 5.50% | 0.38% |
Magnum Balanced (2.23%) obviously did not wish to be left trailing its siblings from the equity segment; this is apparent from its top position in the balanced funds segment. Alliance 1995 (2.18%) was in second place followed by Sundaram Balanced (2.01%) in third position. Category leader HDFC Prudence (0.61%) had a dismal week.
The seemingly relentless bull run in equity markets has provided investors an opportunity to gauge their fund manager's true investment style.
Find out if your fund manager has succumbed to the temptation of clocking impressive returns by overshooting the equity limit allotted to him. If yes, then rest assured your fund manager is taking on added risk on the sly, which may work against your risk profile.
We at Personalfn have always advocated making investments in line with one's risk appetite and investing for the purpose of tax-planning is no different. Tax-saving funds (in their new avatar as a part of Section 80C) offer investors of the risk-taking variety an opportunity to do the same.
However there is another aspect of tax-saving funds which is over looked by most investors i.e. their ability to deliver as pure investment avenues. Even if tax-planning is not on your agenda, tax-saving funds can prove to be very lucrative investment avenues.
Another feature of tax-saving funds that merits a mention is the 3-year lock-in period. With the equity markets trading at record highs, it is now all the more imperative for investors entering the markets at this stage to do so with a long-term horizon.
Tax-saving funds (courtesy the mandatory lock-in period) propagate this cause. Investors would do well remember that equity investments should always be made with a long-term horizon, since it is over this time frame that equities have the potential to truly unlock their value and outperform other comparable assets.
Our advice to investors -- subject to your risk appetite, get invested in tax-saving funds using the systematic investment plan (SIP) route.
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