The last week witnessed one of the sharpest falls in equity markets in recent history. The BSE Sensex slumped by 3.04% to close at 6,154 points while the S&P CNX Nifty fell by 3.25% to end the week at 1,903 points.
Depressing corporate results and a looming rising rate scenario dealt a double whammy to stock markets.
Leading Diversified Equity Funds
| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 1-Yr | 3-Yr | SD | SR |
| KOTAK OPPORTUNITIES | 13.69 | 0.76% | 10.92% | - | - | 7.05% | 0.60% |
| DISCOVERY STOCK | 9.52 | 0.42% | 1.71% | 63.01% | 33.49% | NA | NA |
| MAGNUM EMERGING BUS. | 15.17 | 0.40% | 7.06% | - | - | 7.13% | 0.87% |
| MAGNUM GLOBAL | 17.80 | 0.39% | 5.01% | 75.94% | 52.85% | 6.74% | 0.87% |
| FRANKLIN INDIA PRIMA | 118.08 | 0.20% | 6.33% | 51.17% | 62.40% | 8.15% | 0.66% |
(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.)
While stocks from the broad-based indices (Sensex, Nifty) were falling like nine pins, it was just another day at the office for mid cap stocks. That explains how mid cap funds ignored the negative sentiment in large caps and managed to remain in positive territory.
Kotak Opportunities (0.76%) was at the top with Discovery Stock (0.42%) and Magnum Emerging Business (0.40%) trailing it at a distance.
The mutual fund IPO (initial public offering) season is still very much on. Of course, that is not to say that investors have grown any wiser after seeing a string of IPOs over the past few months. IPOs continue to attract disproportionate interest and investors continue to ignore the basics of investing in their earnestness to grab a 'new' investment opportunity at Rs 10 NAV.
Personalfn shortlists the key criteria that investors need to look at before considering an IPO for investment.
Leading Debt Funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| UTI BOND FUND | 19.31 | 0.20% | 0.99% | 3.90% | 2.12% | 0.73% | -0.27% |
| KOTAK FLEXI DEBT | 10.25 | 0.15% | 0.50% | - | - | 0.04% | -1.19% |
| BOB INCOME | 11.82 | 0.12% | 0.51% | 1.85% | 3.07% | 0.51% | -0.27% |
| TATA DYN. BOND | 10.74 | 0.10% | 0.66% | 2.55% | 2.24% | 0.75% | -0.24% |
| BIRLA DYN. BOND | 10.28 | 0.09% | 0.40% | 2.35% | - | 0.15% | -1.06% |
Yield on the 10-year benchmark rose to 7.22% (up 16 basis points over the last week) in the aftermath of the Monetary Policy. The 25 basis point hike in the reverse repo rate did not go down too well with debt markets.
With the RBI taking the plunge on raising interest rates, the future for long-term debt funds does not look too good. Investors need to consider cash funds and short-term debt funds with the objective to preserve capital and earn a return on investment, even if miniscule.
The week belonged to the flexi/dynamic debt fund category, with three of the five leading debt funds adopting this investment style. UTI Bond Fund (0.20%) was the leader with Kotak Flexi Debt (0.15%) and BoB Income (0.12%) trailing it.
It would appear that the recently announced Monetary Policy has set the tone, although subtly, for a higher interest rate scenario. Personalfn and Equitymaster have analysed how the Monetary Policy impacts your investments in fixed deposits, stock markets and mutual funds, as also home loan rates.
After the Policy announcement we had the opportunity to interview two leading debt fund managers and the Chief Economist at a private sector bank to elicit their views on interest rates and inflation.
Leading Balanced Funds
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 1-Yr | 3-Yr | SD | SR |
| MAGNUM BALANCED | 18.43 | -0.38% | 0.05% | - | - | 3.04% | 0.42% |
| HDFC PRUDENCE | 60.74 | -0.68% | 4.01% | 27.16% | 39.14% | 4.87% | 0.65% |
| LIC BALANCE | 26.73 | -1.01% | 0.28% | 6.19% | 16.83% | 5.05% | 0.30% |
| UTI BALANCED | 35.04 | -1.07% | -0.17% | 13.32% | 23.20% | 4.43% | 0.49% |
| KOTAK BALANCE | 17.30 | -1.30% | 1.31% | 24.19% | 29.65% | 5.42% | 0.51% |
Balanced funds were hit hard by the depressing scenario in equity and debt markets. Consequently, both the equity and debt components were struggling to keep afloat which explains why balanced funds could not give a positive return during the week. Magnum Balanced (-0.38%) fell the least with HDFC Prudence (-0.68%) behind it.
As equity markets witness one of their more prolonged slumps in recent times, investors who have been waiting on the sidelines for a 'correction' need to take cue from this.
Considering equity markets nearly peaked at over 6,900 points (Sensex) a few months ago, they are now more than 10% off their highs.
In our view, this can be a trigger for high-risk investors to make lump sum investments in well-managed equity funds.
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