After scaling the dizzying heights of 8,800 points, the markets finally saw a correction this week. Even then the strong undercurrent in the markets was palpable leading to huge swings in either direction.
The BSE Sensex closed the week 142 points (1.64%) lower at 8,492 points. The S&P CNX Nifty ended the week down by 27 points (1.04%) at 2,574 points. Surprisingly, the CNX Mid Cap index that has seen a dip in performance last month, held its own with just a single-point drop to close at 3,806 points.
Leading Diversified Equity Funds
| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | 3-year | SD | SR |
| UTI INDIA ADV. EQUITY | 6.50 | 2.52% | 3.83% | 24.52% | 44.77% | 34.69% | NA | NA |
| SAHARA MIDCAP | 14.28 | 1.85% | 4.29% | 40.81% | - | - | 4.86% | 0.76% |
| UTI VALUE | 24.85 | 1.59% | 2.69% | 28.56% | 49.18% | 55.55% | 6.49% | 0.44% |
| HSBC MIDCAP | 14.25 | 1.55% | 7.06% | - | - | - | 3.11% | 2.29% |
| TATA GROWTH | 24.49 | 1.50% | 2.34% | 34.13% | 66.05% | 61.62% | 6.61% | 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.)
Given the poor performance of large cap funds and a steady show by mid cap funds, it was not surprising to see the latter dominate the rankings. UTI India Advantage (2.52%) and Sahara Midcap (1.85%) led the field.
Category leaders HDFC Top 200 Fund (-0.09%), HSBC Equity (0.54%) and Franklin Bluechip (-0.48%) had an indifferent week.
Union Budget 2005-06 has given a boost to the tax-paying investor. He now has the flexibility of investing across tax-saving options in line with his risk appetite. The biggest beneficiary of course, is the tax-saving fund (equity-linked saving scheme - ELSS) investor.
Investors can now invest a maximum of Rs 100,000 in tax-saving funds as opposed to the puny Rs 10,000 earlier.
Not surprisingly, fund houses are now falling over themselves to increase the range of tax-saving fund options to the mutual fund investor. That explains the steady string of tax plan NFOs. The latest one to hit the segment is Kotak ELSS Scheme. Personalfn gives its view on the NFO.
Apart from the string of tax plan NFOs, another trend that we at Personalfn have witnessed is a slew of large cap NFOs. As early as in June 2005 in the midst of mid cap frenzy, we had advocated a return to large cap funds. With the enhanced interest in large cap funds at present, that bit of advice seems prophetic now.
Leading Debt Funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | 3-year | SD | SR |
| TATA DYNAMIC BOND FUND | 11.16 | 0.23% | 0.48% | 4.30% | 6.61% | - | 0.72% | -0.32% |
| GRINDLAYS SUPER SAVER MTP | 10.89 | 0.17% | 0.31% | 2.39% | 4.01% | - | 0.43% | -0.72% |
| GRINDLAYS DYNAMIC BOND | 12.52 | 0.13% | 0.33% | 2.79% | 4.08% | 6.72% | 0.71% | -0.55% |
| PRUICICI FLEXIBLE INCOME | 12.59 | 0.13% | 0.27% | 3.47% | 5.96% | 7.72% | 0.81% | -0.51% |
| KOTAK FLEXI DEBT | 10.52 | 0.12% | 0.46% | 2.95% | - | - | 0.04% | -1.58% |
Bond yields climbed this week as was reflected in the 10-year benchmark 7.38% GOI yield (7.14%). Bond yields share an inverse relationship with prices; as yields moved northwards, bond prices and therefore bond fund NAVs fell.
It was clearly the week of the dynamic debt fund. All save one of the leaders (Grindlays Super Saver MTP) in the debt fund category belonged to this genre. Tata Dynamic Bond (0.23%) was the leading debt fund. Dynamic debt funds is another one of our recent recommendation that has proved to be prophetic.
Leading Balanced Funds
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | 3-year | SD | SR |
| UTI BALANCED FUND | 42.23 | 1.32% | 3.35% | 18.66% | 27.16% | 33.27% | 4.04% | 0.38% |
| TATA BALANCED | 34.85 | 0.81% | 1.48% | 18.96% | 42.18% | 42.96% | 4.60% | 0.45% |
| JM BALANCED | 15.59 | 0.71% | 2.36% | 21.04% | 33.59% | 27.50% | 3.84% | 0.32% |
| MAGNUM BALANCED | 21.88 | 0.55% | 2.05% | 33.33% | 65.73% | 53.16% | 3.48% | 0.95% |
| SUNDARAM BAL | 23.81 | 0.51% | 2.77% | 16.21% | 28.85% | 34.07% | 3.86% | 0.37% |
Balanced funds held their own despite a slide in equity and debt markets. UTI Balanced (1.32%) and Tata Balanced (0.81%) led the fray. Category leader HDFC Prudence (-0.07%), however, was in the red.
In the midst of thematic and sector NFOs, investors seem to be losing sight of the most important investment right now, which is tax-saving funds.
With less than 6 months remaining, we at Personalfn urge investors to plan actively for the Rs 100,000 bounty gifted to them rather than get swayed by trends and themes.
Investors who are wondering whether this is the right time to invest given the high market levels at present, should remember with a tax-saving fund you have a (minimum) 3-year investment horizon and over that extended a time frame equity markets still look attractive from a risk-return perspective.
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