The stock markets after seeing some appreciation last week, saw a correction this week. It was a sign for mutual fund investors to beef up their equity fund allocations to take advantage of a downhill market.
The BSE Sensex ended the week on 6,480 points, down by 125 points (1.89%). The S&P CNX Nifty ended the week down by 37 points (1.79%) to close at 2,031 points.
In view of the amazing performance clocked by SBI Mutual Fund schemes, Personalfn spoke to Sethuram Iyer, chief investment officer, SBI Mutual Fund, to better understand how SBI Mutual Fund schemes are being managed.
He revealed that SBI Mutual Fund brought in a clear investment focus in 2003 across its schemes and raised its internal monitoring systems. He sounded positive about the markets over both the medium as well as the long term.
But he is of the opinion that investors shouldn't be looking at timing the markets; rather they should look at a longer time horizon with respect to their mutual fund holdings. The ideal time period for equity investments according to Iyer, is at least three years.
Leading Diversified Equity Funds
| Diversified equity funds | NAV (Rs) | 1-Wk | 1-Mth | 1-Yr | 3-Yr | SD | SR |
| BOB GROWTH | 16.04 | 5.11% | -3.43% | 24.63% | - | 6.46% | 0.35% |
| FRANKLIN INDIA PRIMA | 117.14 | 1.30% | -1.36% | 55.17% | 62.44% | 7.47% | 0.76% |
| SUNDARAM SEL. MIDCAP | 38.92 | 1.05% | -0.26% | 60.36% | - | 6.88% | 0.80% |
| KOTAK OPPORTUNITIES | 13.17 | 0.96% | 0.08% | - | - | 3.43% | 1.05% |
| DISCOVERY STOCK | 9.76 | 0.93% | -4.41% | 66.55% | 35.78% | NA | NA |
(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.)
Considering that the markets corrected this week, funds from the diversified equity segment managed a decent showing for the week. BOB Growth (5.11%) emerged on top of the heap. Franklin India Prima (1.30%) and Sundaram Select Midcap (1.05%) took second and third positions, respectively.
Category leaders HSBC Equity (-2.16%), Franklin India Bluechip (-1.55%) and HDFC Top 200 (-1.43%) witnessed a sharp decline.
Personalfn visitors would surely have been surprised to read a tax-saving fund (ELSS) article on April 9. The reason we undertook the exercise is because under the new tax regime, tax-saving funds have a far more important role to play in the risk-taking investor's portfolio.
We compared tax-saving funds vis-à-vis diversified equity funds to conclude whether they add any significant value to the investor's mutual fund portfolio.
Leading Debt Funds
| Debt funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| TATA INCOME | 21.90 | 0.19% | 0.52% | 2.24% | 0.51% | 0.71% | -0.25% |
| BOB INCOME | 11.78 | 0.17% | 0.37% | 1.54% | 2.93% | 0.63% | -0.22% |
| ESCORTS INCOME PLAN | 20.86 | 0.16% | 0.43% | 2.78% | 3.82% | 0.43% | 0.03% |
| KOTAK FLEXI DEBT | 10.22 | 0.12% | 0.44% | - | - | 0.03% | -2.67% |
| TATA DYNAMIC BOND | 10.68 | 0.12% | 0.38% | 2.39% | 1.78% | 0.96% | -0.20% |
The 10-year GOI yield rose sharply by 32 basis points to end this week at 7.00%. Bond prices and yields share an inverse relationship. Given this relationship, debt funds witness a decline when bond yields firm up.
However, for quite some time now, most debt funds are invested in paper of shorter maturities. This has helped them post positive returns despite a rise in bond yields. Tata Income (0.19%) took the number one spot with BOB Income (0.17%) and Escorts Income plan (0.16%) following closely behind.
Leading Balanced Funds
| Balanced funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| BOB BALANCED | 15.72 | 4.31% | 3.15% | 22.62% | 28.85% | 4.91% | 0.42% |
| FT INDIA BALANCED | 19.24 | 0.84% | -1.99% | 11.67% | 13.51% | 4.08% | 0.66% |
| ALLIANCE 1995 | 102.17 | -0.07% | -2.12% | 16.27% | 20.80% | 4.94% | 0.60% |
| HDFC PRUDENCE | 60.04 | -0.19% | -1.81% | 19.02% | 28.03% | 4.50% | 0.72% |
| CANBALANCE | 21.00 | -0.52% | -1.96% | 6.38% | 4.43% | 3.62% | 0.39% |
The fall in the markets affected balanced funds more than they did funds from the diversified equity segment. Barring BOB Balanced (4.31%) and FT India Balanced (0.84%), the rest posted negative returns for the week.
Equity markets by nature are volatile. Many investors over a period of time have lost money by investing directly in stocks. For such investors, mutual funds offer a good chance to invest in equity markets and benefit from the expertise of an experienced fund management team.
But at all times, care needs to be taken that investments are in tune with one's risk appetite.
Investors should not go overboard in trying to make a quick buck and hurt their financial well being in the long run.
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