It's been quite a rough time for investors over the past few weeks. Less than a month ago, equity markets were trading at record highs and irrational exuberance seemed to be the order of the day. Now with markets having shed more than 10 per cent off their highs, the tables have turned. Despondency seems to have set in.
As we have said before, the market occurrences over the last few weeks are only indicative of the true nature of equity markets wherein volatility over shorter time frames is only to be expected. However, if you are a serious long-term investor, and are investing in line with your risk appetite and investment objectives, there should be no cause for concern. The present occurrences notwithstanding, long-term fundamentals of the economy remain unchanged.
Now to address the question that most investors would be faced with, "what should we do now?". Well, at Personalfn, we have always advised investors to invest in line with their risk appetites and to adhere to their predetermined asset allocations, since changing market conditions have no impact on these factors. Also, we have always recommended that investors should opt for the systematic investment plan mode of investing to even out market fluctuations. Our advice remains unchanged even now.
We have always advocated SIP as an efficient and convenient form of investing. Its biggest advantage is that, it can help reduce the average cost of investments over a period of time. By getting invested across time horizons and market cycles, investors stand a better chance of lowering their investment cost vis-a-vis a lumpsum investment.
In fact, if you have ongoing SIP investments, the present downturn in stock markets is an opportunity for you. More importantly, SIP investing does away with the need to time markets - something most retail investors are incapable of doing and shouldn't indulge in anyway. Also, SIP investing is lighter on the wallet. It enables retail investors to access markets with smaller investments, thereby making the investment process more feasible.
Equity markets dipped for the fourth consecutive week. The BSE Sensex shed 4.88 per cent to close at 14,142 points; the S&P CNX Nifty closed at 4,108 points (down by 5.19 per cent). The CNX Midcap fell by 4.83 per cent, before settling at 5,651 points.
Open-ended Equity Funds: Biggest Losers
| Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| Templeton India Equity Inc. | 12.76 | -6.81% | -11.09% | 1.34% | 28.62% | 6.01% | 0.27% |
| Franklin Infotech | 45.86 | -6.05% | -9.15% | -22.70% | 4.18% | 6.04% | 0.24% |
| Sundaram Select Focus | 61.32 | -5.98% | -9.25% | -1.62% | 23.79% | 7.56% | 0.31% |
| ABN AMRO Opportunities | 23.19 | -5.72% | -11.64% | 9.04% | 40.92% | 8.32% | 0.31% |
| Sundaram Growth | 69.15 | -5.47% | -8.36% | -1.14% | 21.67% | 7.45% | 0.28% |
(Standard Deviation highlights the element of risk associated with the fund. Sharpe Ratio is a measure of the returns offered by the fund vis-à-vis those offered by a risk-free instrument)
Templeton India Equity Income (-6.81 per cent) emerged as the worst performer in the equity funds segment; the same isn't entirely surprising given the meltdown in the global markets and the fund's mandate to invest upto 50 per cent of its assets in global securities.
As on July 31, 2007, global securities accounted for 33.8 per cent of the fund's assets. Global investing has surfaced as the latest trend in the mutual fund industry. As is the case with every trend, the downside is being ignored by most. But more on this, later in the article.
Franklin Infotech (-6.05 per cent), a sector fund and Sundaram Select Focus (-5.98 per cent), a fund known for taking concentrated stock and sector bets in the large cap segment, also featured in the week's biggest losers' list.
Leading open-ended long-term debt funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| Principal Gilt IP | 16.56 | 0.35% | -0.25% | 3.74% | 5.73% | 0.79% | -0.22% |
| Birla Gilt Plus | 24.40 | 0.34% | 0.44% | 5.13% | 10.19% | 0.80% | -0.02% |
| Kotak Gilt Invest. | 24.11 | 0.28% | -0.39% | 3.10% | 4.80% | 0.76% | -0.32% |
| HDFC Gilt | 15.89 | 0.27% | -0.48% | 2.25% | 4.20% | 0.48% | -0.70% |
| Libra Bond | 14.37 | 0.22% | 0.22% | 2.30% | 6.91% | 0.53% | -0.44% |
Gilt funds dominated the long-term debt funds segment. Principal Gilt (0.35 per cent) occupied the top slot, followed by Birla Gilt Plus (0.34 per cent) and Kotak Gilt Investment (0.28 per cent).
Open-ended Balanced Funds: Biggest Losers
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| Escorts Balance | 51.60 | -3.68% | -2.78% | 8.11% | 26.03% | 5.46% | 0.33% |
| LIC MF Balanced | 44.55 | -3.64% | -7.10% | -2.09% | 11.89% | 6.00% | 0.19% |
| Tata Balanced | 53.76 | -3.55% | -6.41% | 5.22% | 27.55% | 5.73% | 0.28% |
| FT Balanced | 35.29 | -3.46% | -4.85% | 3.75% | 25.40% | 4.96% | 0.32% |
| Kotak Balance | 24.85 | -3.41% | -5.65% | 2.97% | 16.93% | 5.13% | 0.28% |
Balanced funds across the board languished in negative terrain. Escorts Balance (-3.68 per cent) emerged as the biggest loser in the balanced funds segment. LIC MF Balanced (-3.64 per cent) and Tata Balanced (-3.55 per cent) occupied second and third positions respectively.
Global fund NFO (new fund offers) is the latest trend in the mutual fund industry. These funds offer Indian investors (whose investment options have so far been largely restricted to domestic equities and fixed income instruments), the opportunity to diversify across global markets. However, investing in global funds has its fair share of risks as well. Hence, investors must evaluate global funds thoroughly and then make an informed decision. This week, we put forth a checklist for investing in global funds.
In our view, investors should consider investing in global funds only when they already have an 'India Portfolio' in place. Investors should first build a portfolio of well-managed diversified equity funds with proven track records in the Indian stock markets. Global funds can form a smaller portion of the portfolio (typically less than 10 per cent). Of course, the precise allocation can be determined by investors in consultation with their financial planners.
By Personalfn.com.
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