It was an eventful week at the markets with a fair sprinkling of volatility and excitement. The week was also marked by a series of official announcements which further rubbed in the feel good factor.
The finance minister announced a series of sweeping duty cuts and sops which were perceived by the markets as a money/budget04.htm mini-Budget.
Markets reacted to the news positively and rose sharply before settling down to levels of sanity. The RBI Governor also revised upwards the economic growth to 7.00 per cent citing positive changes.
The BSE Sensex rose by 1.54 per cent during the week to close at 6,120 points while S&P CNX Nifty closed at 1,972 points up by 1.33 per cent. However these figures only convey part of the story, as the week was marked by sharp volatility.
The Sensex which shed 95 points during a single day rose smartly later to recoup the losses.
The volatility can be gauged by the fact that the Sensex and the Nifty intra-day breached the 6,200 points and 2,000 points level respectively during the week.
Leading Diversified Equity Funds
| Diversified Equity Schemes | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | 3-Yr | Incep. | SD | SR |
| FRANKLIN I BLUECHIP G | 56.08 | 4.76% | 22.63% | 88.25% | 138.94% | 34.63% | 30.15% | 7.10% | 0.57% |
| HSBC EQUITY GR | 28.84 | 4.49% | 19.72% | 100.98% | 176.78% | NA | 168.75% | 6.63% | 1.29% |
| HDFC EQUITY G | 55.11 | 4.16% | 15.67% | 74.92% | 140.98% | 41.92% | 21.58% | 6.01% | 0.66% |
| GIC D'MAT | 15.28 | 4.02% | 17.63% | 64.83% | 92.44% | 23.11% | 6.70% | 5.28% | 0.43% |
| BOINANZA EXCL G | 17.91 | 3.95% | 18.22% | 71.32% | 119.44% | 46.07% | 13.24% | 6.84% | 0.62% |
(Standard deviation indicates by how much the values have deviated from the mean of the values. It measures by how much the investor has diverged from the mean return either upwards or downwards. It highlights the element of risk associated with the fund.)
Equity funds had a good week. Category leader Franklin India Bluechip (4.76 per cent) emerged as the weekly topper, closely followed by HSBC Equity (4.49 per cent).
Debt markets continued to be flush with liquidity and the central bank conducted auctions (7.38 per cent 2015 GOI securities) and open market operations (18-year bonds) during the week.
Markets monitored very closely the RBI Governor's statements on inflation. Economic growth is seen as a precursor to higher inflation, which acts as a disincentive for pursuing softer interest rate policies.
The 7.27 per cent 2013 GOI bond yield remained unchanged from the previous week's close of 5.11 per cent (January 9, 2004). The 10-year benchmark 7.37 per cent 2014 GOI yield closed at 5.12 per cent (January 9, 2004).
Leading Income funds
| Income Schemes | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | 3-Yr | Incep. | SD | SR |
| ESCORTS INC PLAN G | 19.68 | 0.15% | 1.41% | 4.62% | 11.24% | 12.66% | 12.72% | 0.38% | 1.05% |
| SUNDARAM SELECT DEBT DYN A | 12.04 | 0.13% | 0.95% | 5.27% | 9.58% | NA | 14.82% | 1.56% | 0.40% |
| CHOLA FREE.INC C | 18.25 | 0.13% | 0.66% | 3.06% | 6.59% | 10.33% | 10.57% | NA | NA |
| UTI BOND FUND G | 18.66 | 0.11% | 1.20% | 3.70% | 6.21% | 11.62% | 11.74% | 0.85% | 0.29% |
| SUNDARAM INCOME PLUS G | 11.41 | 0.10% | 0.63% | 2.84% | 5.39% | NA | 9.42% | 0.91% | 0.21% |
(The Sharpe Ratio is a measure of the returns offered by the fund vis-à-vis those offered by a risk-free instrument)
Escorts Income Plan (0.15 per cent) surfaced as the weekly topper. Sundaram Select Dynamic and Chola Free Income shared the second spot with weekly returns of 0.13 per cent.
The recently promulgated mini-Budget has provisions for bonds targeted at senior citizens which will offer returns at 'higher than market' rates.
In a situation when investors are increasingly disinclined towards investing in debt markets, such moves will only worsen the situation.
Funds that would have flown into the markets will instead be invested in these bonds.
Markets will be under pressure to offer higher interest rates to attract investors thereby causing a distortion. Also the economic infeasibility of such 'please the masses' moves will be mirrored in a bloated fiscal deficit.
Leading Balanced Funds
| Balanced Schemes | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | 3-Yr | Incep. | SD | SR |
| PNB BAL GROWTH | 21.79 | 3.23% | 16.25% | 50.28% | 73.47% | 17.88% | 17.47% | 4.34% | 0.50% |
| HDFC PRUDENCE G | 48.06 | 2.34% | 12.20% | 48.32% | 97.45% | 34.19% | 21.29% | 4.11% | 0.76% |
| PRINCIPAL BAL G | 16.82 | 2.31% | 6.19% | 36.19% | 65.23% | 18.40% | 18.05% | 3.96% | 0.58% |
| BIRLA BALANCE G | 15.95 | 2.31% | 13.52% | 45.13% | 75.47% | 16.68% | 13.50% | 4.63% | 0.44% |
| SUN F&C BAL G | 12.25 | 2.17% | 11.97% | 54.28% | 71.81% | 16.09% | 3.58% | 5.00% | 0.41% |
Riding on the strong surge in equity markets, balanced funds managed to deliver reasonable returns. PNB Balanced Growth (3.23 per cent) surfaced as the top performing balanced fund.
Category leader HDFC Prudence Fund (2.34 per cent) came in second spot followed closely by Principal Balanced Fund (2.31 per cent).
In volatile times like these, investors should turn to conservatively managed balanced funds like Sundaram Balanced Fund and JM Balanced Fund.
These funds apart from capping their exposure to equities also maintain a rigid limit on the holding per stock invested.
The high degree of diversification may stifle growth in a bull run, but makes up for the same by keeping volatility at bay consistently.
Over a longer horizon (3 years - 5 years), these funds manage to offer the same returns as those offered by aggressively managed balanced funds.
Investors generally enter markets with a pre-determined objective. This objective could vary from providing for children's education, buying a car to simply beating the returns offered by bank deposits.
When the markets experience a rally like the present one there is a fair chance that your investment objective has been met. Now is the time to act sensibly!
Book a part of your profits and take home some of your gains.
In times like these it is easy to get carried away and be tempted to stay invested with the hopes of raking even higher returns.
However profit booking will ensure that you have something to show for even if the tide turns; on the other hand even if the rally continues you are still partly invested.
Effectively it's a choice between one bird in hand versus two in the bush. No prizes for guessing what smart investors will choose!
