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Markets keep them guessing

December 06, 2003 14:18 IST

The markets were in top gear for a better part of the week. After breaching the 5,000 mark last week, this time around the BSE Sensex crossed the 5,200 level.

However, there was more to come, on Friday the markets plunged sharply (96 points) to close the week at 5,132 points.

A week on week comparison shows a growth of 1.7% concealing the sharp instability experienced during the week. The S&P CNX Nifty rose by 1.9% to close at 1,646 points.

Leading Diversified Equity Funds
Diversified Equity SchemesNAV (Rs)1-Wk1-Mth6-Mth1-Yr3-Yr5-YrIncep.SDSR
HDFC CAPITAL BLD. G 21.156.9%18.1%72.8%101.4%22.0%NA13.3%6.18%0.50%
FRANKLIN PRIMA FUND G 69.446.9%19.8%82.7%149.9%50.6%44.8%21.4%7.89%0.62%
BIRLA MIDCAP G 20.305.0%15.9%65.4%95.0%NANA86.2%6.39%0.84%
RELIANCE VISION G 60.534.6%10.1%86.0%138.4%48.9%43.8%24.7%6.65%0.83%
GIC FORTUNE 94 13.554.5%9.5%65.6%105.0%28.0%18.8%4.2%7.45%0.52%
(NAVs as on December 05, 2003. Growth over 1-Yr is compounded annualised)
(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 reasonably good week spurred by the strong rally on the first four days.

Funds with predominant mid-cap holdings made it to the top for the second week in a row. HDFC Capital Builder (6.9%) and Franklin Prima Fund (6.9%) shared the top spot.

In an interview with Personalfn, Chetan Sehgal, Director Research - Franklin Templeton Investments, said: "The rationale for investing in equity markets has never been clearer. Investors must look to maximise their returns over the long term and equity markets have traditionally been the best place to maximise wealth over the long term."

His advice for the retail investor was: "Don't be bearish or cynical too often. Allocation of money is important and one must do that based on one's profile and do take financial advise from experts."

Yet again an industry expert stresses on the virtues of long term investing in equity markets and professional assistance.

Debt markets had a bearish undertone this week as well. The benchmark 10-year 7.27% GOI yield closed at 5.20% (December 5, 2003) - 6 basis points above the previous weekly close.

The only glimmer of hope was the liquidity management report released by the Reserve Bank of India. Markets reacted positively to proposed measures like reduction in interest on cash reserves, perceiving it as a sign of a softer interest rate bias going forward.

Leading Income Funds
Income SchemesNAV (Rs)1-Wk1-Mth6-Mth1-YrIncep.SDSR
HDFC FLOATING LTP G 10.450.4%0.6%2.5%NA4.4%0.04%-4.40%
TEMPLETON FLOAT LTP G 11.250.1%0.4%2.4%5.8%6.6%0.10%-0.13%
ESCORTS INC PLAN G 19.400.1%0.7%3.8%10.8%12.7%0.34%1.11%
GRINDLAYS FLOATING G 10.420.1%0.4%2.6%NA4.2%0.04%-2.89%
DSP ML FLOATING RATE G 10.290.1%0.4%2.5%NA2.8%0.02%-5.31%
(NAVs as on December 06, 2003. Growth over 1-Yr is compounded annualised)
(The Sharpe Ratio is a measure of the returns offered by the fund vis--vis those offered by a risk-free instrument)

It was yet another mediocre week for income funds. Floating rate funds dominated the proceedings once again, with the exception of Escorts Income Plan (0.1%).

HDFC Floating LTP (0.4%) surfaced as the top-performing fund for the week, a safe distance from the runner up Templeton Float LTP (0.1%).

While income fund returns are not as attractive as they used to be, they have an edge over conventional fixed income instruments like fixed deposits in areas like liquidity and tax efficiency.

Also the FD allure has reduced sharply on account of the softer interest regime. Investors looking to combine market-linked returns with a degree of stability will find that income funds continue to be a good bet.

Leading Balanced Funds
Balanced SchemesNAV (Rs)1-Wk1-Mth6-Mth1-Yr3-YrIncep.SDSR
CANGANGA 12.343.4%5.9%48.0%60.3%7.2%4.5%5.92%0.26%
FT BALANCED G 14.763.0%5.1%45.4%61.1%20.5%8.8%3.00%0.37%
FRANKLIN BAL G 16.163.0%5.5%38.6%58.0%19.7%16.5%3.68%0.53%
UNIT SCHEME 95 G 28.432.7%6.3%38.3%50.4%14.4%19.2%3.61%0.47%
TATA BALANCED 21.552.6%9.5%56.5%74.0%16.5%15.0%4.78%0.46%
(NAVs as on December 06, 2003. Growth over 1-Yr is compounded annualised)

It was a moderate week for balanced funds with leading funds ranging from 2.6% to 3.4%. Franklin Templeton's flagship balanced funds FT Balanced Fund (3.0%) and Franklin Balanced (3.0%) were among weekly toppers.

With markets consistently displaying inconsistent behavior investors would do well by sticking to the basics. Invest according to your profile with a longish investment horizon.

Changing market conditions like bull runs or otherwise don't necessarily mean that your profile is any different.




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