The month's big event was the Union Budget 2008-09; however, it proved to be a bit of an anti-climax for mutual fund investors.
The only noteworthy change was that the short-term capital gains tax was raised from 10 per cent to 15 per cent. In effect, short-term transactions will become less attractive for investors. Clearly, the benefits of long-term investing aren't lost on the Finance Minister either.
However, the month was certainly not a staid one. There was enough action in and outside the markets to keep investors engrossed. For instance, the market regulator i.e. the Securities and Exchange Board of India did away with the provision of charging initial issue expenses and amortisation thereof on close-ended new fund offers.
As a result, fund houses will no longer be permitted to utilise 6 per cent of assets mobilised at the NFO stage to meet sales and distribution expenses, and charge the same to the fund. Instead, they will have to meet the aforementioned expenses by charging an entry load. It can be safely assumed that close-ended NFOs will soon lose favour with fund houses.
Both Foreign Institutional Investors (FIIs) and mutual funds were net buyers of equities in February 2008 with purchases of Rs 48,827 m and Rs 2,212 m respectively (as on February 29, 2008).
There was no respite for investors as equity markets continued to be at their volatile best for the second month in a row. The BSE Sensex fell (albeit marginally) by 0.45 per cent and closed at 17,579 points; the S&P CNX Nifty ended the month in positive territory (up by 1.69 per cent at 5,224 points). The CNX Midcap rose by 5.09 per cent and closed at 7,680 points.
Monthly top losers: Open-ended equity funds
|
· Equity Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
Taurus Starshare |
59.32 |
-10.94% |
17.03% |
57.26% |
11.42% |
0.23% |
|
Principal Junior Cap |
18.24 |
-8.98% |
10.48% |
30.47% |
10.09% |
0.14% |
|
Magnum Emerg. Businesses |
39.08 |
-8.82% |
14.04% |
37.03% |
10.27% |
0.15% |
|
Reliance Media & Ent. |
32.12 |
-8.27% |
5.24% |
31.64% |
10.14% |
0.24% |
|
Kotak Lifestyle |
13.44 |
-7.42% |
2.37% |
15.97% |
9.15% |
0.11% |
(Source: Credence Analytics. NAV data as on February 29, 2008.)
(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 and thematic funds featured as the top losers in the equity funds segment. Taurus Starshare (-10.94 per cent) emerged as the biggest loser, followed by Principal Junior Cap (-8.98 per cent) and Magnum Emerging Businesses (-8.82 per cent).
Monthly top gainers: Long-term debt funds
|
· Debt Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
Sahara Gilt |
13.36 |
2.20% |
4.55% |
7.07% |
0.45% |
0.07% |
|
Tata GSec |
25.41 |
1.53% |
6.84% |
9.81% |
0.73% |
0.05% |
|
Templeton GSec |
18.36 |
1.34% |
8.39% |
10.68% |
0.93% |
0.15% |
|
HDFC Floating |
13.34 |
0.82% |
4.45% |
8.28% |
0.10% |
0.43% |
|
Birla Dynamic Bond |
12.59 |
0.80% |
5.82% |
10.84% |
0.30% |
0.43% |
(Source: Credence Analytics. NAV data as on February 29, 2008.)
GSec (government securities) funds dominated proceedings in the long-term debt funds segment. Sahara Gilt (2.20 per cent) surfaced as the best performer, followed by Tata GSec (1.53 per cent). Templeton GSec (1.34 per cent) and HDFC Floating Rate (0.82 per cent) held the third and fourth positions respectively.
Monthly top losers: Balanced funds
|
· Balanced Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
Birla Sun Life 95 |
225.57 |
-3.89% |
6.75% |
29.62% |
6.69% |
0.22% |
|
JM Balanced |
27.89 |
-3.61% |
-0.89% |
26.36% |
7.11% |
0.18% |
|
Kotak Balance |
28.72 |
-3.04% |
17.96% |
35.16% |
6.98% |
0.18% |
|
BOB Balanced |
29.95 |
-2.89% |
16.99% |
35.89% |
8.83% |
0.09% |
|
HDFC Prudence |
141.42 |
-2.84% |
8.38% |
26.65% |
5.96% |
0.23% |
(Source: Credence Analytics. NAV data as on February 29, 2008.)
Birla Sun life 95 (-3.89 per cent) fared the worst in the balanced funds segment. JM Balanced (-3.61 per cent) and Kotak Balance (-3.04 per cent) occupied the second and third positions respectively.
In recent times, we have seen fund houses deploy some rather interesting tactics in a bid to outdo one another. For example, bundling of add-on benefits is a common phenomenon; for instance, fund houses offer insurance benefits to investors in their funds.
While on the surface this looks like an interesting proposition, investors need to evaluate the utility of the add-on benefit. More importantly, they need to decide if the fund on offer is a worthwhile investment avenue in the first place. If the fund itself (i.e. in isolation) fails to make the grade, then the add-on benefit makes little sense.
Similarly, we have seen reputed fund houses succumb to the pressure of thematic funds (that without a doubt are the season's favourite). Fund houses that swore by the virtues of diversified equity funds have now gone ahead and launched thematic NFOs.
Furthermore, the fund houses are harping on their fund management track records to convince investors of the worthiness of their thematic offerings. However, the fact that thematic funds tend to be short-term marvels and that the stated track records are related to diversified offerings has been conveniently forgotten.
The above instances only underscore the need to exercise greater care and apply thought while making investment decisions. The need for expert and unbiased investment advice has never been more imperative.
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