November 2005 proved to be the perfect antithesis of the previous month. The seemingly despondent situation was replaced by an ecstatic one as equity markets changed course and scaled record highs.
The BSE Sensex appreciated by 11.36% during the month and closed at 8,789 points; S&P CNX Nifty ended the month at 2,652 points (up by 11.86%). The CNX Midcap posted a growth of 10.17% and closed at 3,833 points.
Leading Diversified Equity Funds
| Diversified Equity Funds | NAV (Rs) | 1-Mth | 3-Mth | 1-Yr | SD | SR |
| MAGNUM MULTIPLIER PLUS | 31.58 | 15.85% | 13.11% | 80.81% | 7.76% | 0.44% |
| PRU ICICI EMERGING STAR | 18.68 | 14.60% | 4.71% | 77.90% | 7.49% | 0.62% |
| FRANKLIN INDIA FLEXI CAP | 13.91 | 14.49% | 12.81% | - | 6.78% | 0.51% |
| RELIANCE EQUITY OPP. | 13.41 | 14.21% | 7.71% | - | 7.28% | 0.46% |
| KOTAK GLOBAL INDIA | 19.11 | 14.19% | 10.31% | 48.03% | 5.69% | 0.46% |
(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.)
Magnum Multiplier Plus (15.85%) surfaced as the top performer in the diversified equity funds segment followed by PruICICI Emerging STAR (14.60%). It was a good month for category leaders Franklin India Bluechip (12.83%), HDFC Top 200 (12.13%) and HSBC Equity (11.22%).
Mid cap majors Franklin India Prima (10.28%) and Sundaram Select Midcap (9.33%) pitched in good performances as well, albeit they failed to match their large cap peers. Incidentally, both mutual funds (Rs 5.8 bn) and FIIs (Rs 40.4 bn) were net buyers in equity markets in November 2005.
The month proved to be quite an eventful one for the mutual fund industry. The controversy surrounding the tax-saving funds (ELSS) segment in particular had become a cause for concern for investors.
Subsequent clarifications by authorities suggest that status quo will be maintained and tax-saving funds will continue in their existing form.
Another interesting development was the launch of a close-ended fund, Franklin India Smaller Companies Fund. The fund (like a number of new fund offers in recent times) will invest in companies from the mid and small cap segment; however the close-ended nature will be the differentiating factor.
The same will permit the fund manager to adopt a 'buy and hold' strategy while dealing with inherently risky propositions like mid and small cap stocks.
Leading Debt Funds
| Debt Funds | NAV (Rs) | 1-Mth | 3-Mth | 1-Yr | SD | SR |
| KOTAK BOND | 18.26 | 0.89% | 1.70% | 6.91% | 0.70% | -0.30% |
| ESCORTS INCOME | 10.08 | 0.51% | 1.01% | 4.27% | 0.33% | -0.54% |
| BIRLA SUN LIFE INCOME | 23.82 | 0.47% | 1.17% | 6.41% | 0.75% | -0.42% |
| TATA INCOME PLUS | 11.80 | 0.47% | 0.94% | 6.50% | 0.60% | -0.45% |
| KOTAK FLEXI DEBT | 10.61 | 0.45% | 1.35% | 0.00% | 0.03% | -2.01% |
Kotak Bond (0.89%) towered heads and shoulders above its peers from the debt funds segment. Escorts Income (0.51%) and Birla Sun Life Income (0.47%) occupied second and third positions respectively.
Recently, Personalfn interviewed Nilesh Shah, CIO, PruICICI Mutual Fund, to get his views on the debt markets and what retail investors should do. His advice: "We recommend that investors look at long term debt funds with a minimum investment horizon of one year, only when the 10-year yield is close to 7.35%-7.50%. Investors seeking capital protection may want to look at the liquid, floater and short-term plan".
Leading Balanced Funds
| Balanced Funds | NAV (Rs) | 1-Mth | 3-Mth | 1-Yr | SD | SR |
| CAN BALANCED | 26.70 | 14.74% | 16.95% | 46.78% | 5.41% | 0.38% |
| LIC MF BALANCED | 33.71 | 10.75% | 5.07% | 28.76% | 4.90% | 0.23% |
| JM BALANCED | 15.87 | 10.21% | 5.87% | 31.16% | 4.37% | 0.24% |
| PRINCIPAL BALANCED | 17.45 | 9.06% | 5.95% | 35.17% | 4.90% | 0.32% |
| BOB BALANCED | 19.32 | 8.66% | -0.97% | 41.02% | 5.39% | 0.32% |
Balanced funds drew from the strong surge in the equity markets. Can Balanced (14.74%) emerged as the leader in the balanced funds segment. JM Balanced (10.21%) and Principal Balanced (9.06%) also featured in the top performers list. Category leader HDFC Prudence (8.18%) pitched in a good performance.
Our advice to investors: Don't make investments contrary to your risk profile. With markets touching record highs, a number of investors are likely to be tempted to throw caution to winds and make investments to capitalise on the bull run. At the risk of sounding monotonous, we urge investors to refrain from doing so.
Instead, here's what you should do. Engage the services of an experienced and qualified investment advisor who can chalk out an asset allocation plan for you. The advisor can help you identify investment opportunities, which are otherwise overlooked and given the cold shoulder.
While few would dispute the importance of quality advice during a bear phase; its relevance during a bull run shouldn't be undermined either.
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