The good times continued unabated for mutual fund investors in June 2005. Popular indices like the BSE Sensex and S&P CNX Nifty touched record highs. The Sensex breached the 7,000-point barrier and posted a monthly gain of 7.38 per cent; the S&P CNX Nifty appreciated by 6.37 per cent to close at 2,221 points.
On the other hand, it was a modest month for stocks from the mid cap segment; the CNX Mid Cap 200 rose by a measly 0.33 per cent and closed at 2,992 points.
While excitement among investors was unbounded, fund managers were busy selling stocks last month to book profits at attractive levels. As per the Securities and Exchange Board of India website, mutual funds were net sellers (Rs 1816.8 crore) in the equities segment during the month; conversely, FIIs (Foreign Institutional Investors) bought more than they sold (net purchases - Rs 5328.6 crore).
Leading Diversified Equity Funds
| Diversified Equity Funds | NAV (Rs) | 1-Mth | 6-Mth | 1-Yr | 3-Yr | SD | SR |
| DISCOVERY STOCK | 11.39 | 9.62% | 19.14% | 111.32% | 35.55% | 7.87% | 0.48% |
| FIDELITY EQUITY | 10.94 | 6.44% | - | - | - | 1.26% | -0.09% |
| JM EQUITY | 20.94 | 5.92% | 16.98% | 61.33% | 42.02% | 6.21% | 0.51% |
| CHOLA GROWTH | 18.04 | 5.50% | 10.20% | 58.66% | 43.66% | 6.43% | 0.53% |
| MAGNUM EQUITY | 16.67 | 5.04% | 8.04% | 49.51% | 33.10% | 6.21% | 0.51% |
(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.)
Discovery Stock (9.62 per cent) emerged as the top performer from the diversified equity funds segment. Recently launched -- Fidelity Equity (6.44 per cent) came in at a distant second. JM Equity (5.92 per cent) and Chola Growth (5.50 per cent) also featured in the list.
It was a mixed week for the category leaders. Franklin India Bluechip (4.51 per cent) and HDFC Top 200 (4.31 per cent) had a good month; while HSBC Equity (0.61 per cent) pitched in a poor performance. With the mid cap segment losing steam, investors in the mid cap majors had no reason to cheer; Franklin Prima (-1.32 per cent), Magnum Global (-0.73 per cent) and Sundaram Select Midcap (0.05 per cent) had a tough month.
A significant development this month was the crackdown on the terminology "mutual fund IPOs". SEBI has objected in no uncertain terms to the practice adopted by mutual funds to term their new offering as 'IPOs' (initial public offerings). For some time now, investment advisors and fund houses alike have unfairly benefited from this anomaly.
Retail investors have been led to believe that mutual fund IPOs are akin to stock IPOs and investing in the former can be a quick way to make money. Another widely-prevalent fallacy is that its cheaper to buy the fund in its IPO stage on account of the Rs 10 NAV.
Leading Debt Funds
| Debt Funds | NAV (Rs) | 1-Mth | 6-Mth | 1-Yr | 3-Yr | SD | SR |
| UTI BOND | 20.06 | 1.96% | 6.65% | 7.97% | 7.32% | 0.76% | 0.09% |
| TATA DYNAMIC BOND | 10.98 | 1.58% | 4.10% | 4.71% | - | 0.72% | 0.01% |
| DEUTSCHE PREMIER BOND | 11.52 | 1.35% | 3.84% | 5.01% | - | 0.88% | 0.03% |
| TATA INCOME PLUS | 11.50 | 1.18% | 3.26% | 3.30% | - | 0.62% | -0.17% |
| MAGNUM INCOME | 18.63 | 1.03% | 3.10% | 2.75% | 6.32% | 0.72% | -0.20% |
Investors in the debt funds segment had a rewarding month. In line with the trend in the recent past, bond yields inched southwards this month as well. Bond yields and prices share an inverse relation with falling yields translating into higher bond prices.
In itself, the fall in bond yields last month is an unexpected event particularly with crude oil prices touching $60 per barrel. Typically, an event of this magnitude, should have triggered inflationary concerns leading to a rise in bond yields. That the opposite has happened is a phenomenon in itself.
UTI Bond (1.96 per cent) surfaced as the leader in the debt funds segment. Tata Dynamic Bond (1.58 per cent) and Deutsche Premier Bond (1.35 per cent) occupied second and third positions respectively.
Leading Balanced Funds
| Balanced Funds | NAV (Rs) | 1-Mth | 6-Mth | 1-Yr | 3-Yr | SD | SR |
| KOTAK BALANCE | 18.08 | 3.77% | 13.48% | 53.67% | 33.71% | 4.91% | 0.51% |
| UTI VARIABLE INV. | 12.90 | 3.43% | 4.69% | 20.43% | - | 2.68% | 0.40% |
| MAGNUM BALANCED | 20.36 | 2.78% | - | - | - | 1.76% | 0.10% |
| FRANKLIN BAL | 21.70 | 2.75% | 6.58% | 30.94% | 28.87% | 4.41% | 0.50% |
| ESCORTS BAL | 28.16 | 2.75% | 10.06% | 46.54% | 30.31% | 5.67% | 0.44% |
Balanced fund returns ranged between 2.75 per cent to 3.77 per cent during June 2005. Kotak Balance (3.77 per cent) emerged as the top performer in the balanced funds segment, followed by UTI Variable Investment (3.43 per cent). Category leader HDFC Prudence (0.83 per cent) had a modest month.
With equity markets trading at record highs, investors need to make more informed decisions. We at Personalfn, presented an investment strategy for the present investment scenario. Another area to watch out for is the quality of advice. It is imperative for investors to appreciate the vital role played by an investment advisor and more importantly ensure that they are associated with the right investment advisor.
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