Equity markets shrugged off the 'November blues' and closed in positive terrain in the month of December. The BSE Sensex posted a gain of 4.36% to close at 20,207 points, while the S&P CNX Nifty closed at 6,139 points (up by 6.52%). It was a particularly good month for investors in the mid cap segment; the CNX Midcap rose by 15.07%, before settling at 9,199 points.
Foreign Institutional Investors (FIIs) and mutual funds were both net buyers in the domestic equity markets during the month. FIIs bought equities to the tune of Rs 29,580 m, while the corresponding number was Rs 33,202 m for mutual funds.
Sector/thematic funds have clearly emerged as the season's flavour in recent times. A cursory glance at top-performing equity funds over the last 12 months will reveal how sector/thematic funds (especially of the infrastructure variety) have dominated proceedings.
Fund houses have done their bit by launching a slew of sector/thematic funds and there are more on the way. Mutual fund agents have added to the hype by bedazzling investors with the impressive growth numbers.
However, one vital aspect that has been conveniently sidelined is the risk factor. The high risk-high return investment proposition offered by sector/thematic funds has been ignored. Being invested in sector/thematic funds after the story has fizzled out can be an unenviable proposition.
On the other hand, there are diversified equity funds that can also participate in the current 'hot' story (and thereby gain from it), without going overboard. Let's not forget that diversified equity funds can seek investment opportunities in other avenues as well, once a given sector/theme runs out of steam; sector/thematic funds with their restrictive mandates have no such luck.
Monthly top performers: Open-ended equity funds
| Equity Funds | NAV (Rs) | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| Reliance Reg. Sav. Equity | 30.18 | 26.56% | 71.40% | 92.29% | 9.60% | 0.48% |
| Reliance Pharma | 30.46 | 21.45% | 17.55% | 49.48% | 9.50% | 0.22% |
| UTI Thematic Mid Cap | 34.41 | 20.48% | 48.51% | 52.44% | 10.32% | 0.21% |
| JM Healthcare Sector | 19.89 | 19.47% | 3.07% | 11.18% | 8.73% | 0.09% |
| JM Small & Mid Cap | 17.61 | 19.34% | 60.73% | - | 6.42% | 1.11% |
(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)
Sector/thematic funds dominated proceedings in the equity funds segment. Reliance Regular Savings-Equity (26.56%) emerged as the top performer. Reliance Pharma (21.45%) and UTI Thematic Mid Cap (20.48%) occupied second and third positions respectively.
Monthly top performers: Long-term debt funds
| Debt Funds | NAV (Rs) | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| Birla Gilt | 25.66 | 2.65% | 7.55% | 9.39% | 0.96% | 0.13% |
| ICICI Pru. Gilt | 24.48 | 2.49% | 6.85% | 8.73% | 0.96% | 0.12% |
| Principal Gilt | 17.39 | 2.40% | 6.55% | 6.65% | 0.94% | -0.04% |
| Templeton GSec | 17.57 | 2.14% | 5.24% | 6.31% | 0.78% | -0.07% |
| HDFC Gilt | 16.64 | 2.14% | 5.05% | 6.25% | 0.70% | -0.28% |
Birla Gilt (2.65%) occupied the top slot in the long-term debt funds segment, followed by ICICI Prudential Gilt (2.49%). Principal Gilt (2.40%) and Templeton GSec (2.14%) also featured among the top performers.
Monthly top performers: Balanced funds
| Balanced Funds | NAV (Rs) | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| LIC MF Balanced | 74.52 | 13.21% | 61.85% | 63.49% | 7.11% | 0.39% |
| Birla Sun Life 95 | 265.24 | 12.83% | 32.07% | 52.07% | 6.09% | 0.42% |
| Escorts Balance | 77.68 | 10.32% | 46.12% | 67.41% | 6.97% | 0.42% |
| DSP ML Balanced | 58.21 | 10.13% | 31.86% | 50.92% | 5.90% | 0.42% |
| Principal Balanced | 32.42 | 9.12% | 37.26% | 47.79% | 6.62% | 0.32% |
LIC MF Balanced (13.21%) topped the balanced funds segment. Birla Sun Life 95 (12.83%) and Escorts Balance (10.32%) made it to the top performers' list.
The tax-planning season is now at its peak. As a result, avenues like tax-saving mutual funds (ELSS), National Savings Certificate and Public Provident Fund, among others are being explored by investors. However, a commonly made mistake is that tax-planning is considered in isolation.
Investors fail to realise the potential of tax-saving investments in contributing towards wealth creation. As a result, it is vital that tax-planning be considered as a part of the investor's overall financial planning and not in isolation.
Also, having a well thought-out plan for making tax-planning investments is pertinent. The investor's risk profile needs to be taken into account while making the plan.
More importantly, the plan has to be customised to suit the investor in question i.e. a 'one size fits all' approach can't be adopted. If you haven't begun your tax-planning exercise as yet, now is the time to get started.
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