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Budget and mutual funds: What might happen

Last updated on: February 13, 2006 10:03 IST

The inevitable finally happened; the BSE Sensex pierced through the 10,000-point barrier, ending the week at 10,111 points (up 3.77%), rallying by 368 points over the previous week. The S&P CNX Nifty ended the week at 3,028 points (up 2.96%) an 87-point appreciation. The CNX Mid Cap index closed at 4,427 points, up 3.26% over the previous week.

Leading Diversified Equity Funds
Diversified Equity Funds NAV (Rs) 1-Wk 1-Mth 6-Mth 1-Yr SD SR
KOTAK MID-CAP 17.16 6.33% 8.34% 29.51% - 5.21% 0.78%
TAURUS STARSHARE 31.07 5.14% 11.16% 29.46% 71.94% 7.11% 0.53%
FRANKLIN OPPORTUNITIES 18.61 5.02% 7.51% 23.98% 61.27% 6.12% 0.45%
KOTAK OPPORTUNITIES 23.05 5.00% 9.11% 32.06% 77.17% 4.28% 1.03%
BOB GROWTH 25.90 4.90% 8.73% 22.34% 57.16% 6.78% 0.39%
(Source: Credence Analytics. NAV data as on Feb 10, 2006. Growth over 1-year is compounded annualised)
(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.)

Schemes from the diversified equity funds category had a good week. Kotak midcap (6.33%) took the number one spot followed by Taurus Starshare (5.14%) and Franklin Opportunities (5.02%).

Category leaders Franklin India Bluechip (3.71%) and HDFC Top 200 (2.22%) turned in a decent performance for the week but HSBC Equity (1.49%) failed to impress. Amongst the midcap majors, Sundaram Select Midcap (3.00%) and Franklin Prima (2.51%) had a decent week.

The NFO (new fund offer) launches keep coming at the investor relentlessly. Likewise, we persist in our view that the current lot of NFOs are too restricted in their investment mandate (read thematic) to offer 'serious' value-add from a 3-5 year perspective. Add to this the fact that some of these NFOs are seeing transfers from existing mutual funds and you will understand why Personalfn always seems to be concerned about the huge NFO collections. For more insight on some of the NFOs doing the rounds presently, watch this space.

Leading Debt Funds
Debt Funds NAV (Rs) 1-Wk 1-Mth 6-Mth 1-Yr SD SR
PRINCIPAL INCOME 16.30 0.13% -0.01% 1.48% 4.33% 0.63% -0.43%
ABN AMRO FLEXI DEBT 10.53 0.12% 0.49% 1.55% 4.22% 0.33% -0.70%
LIC BOND 19.04 0.11% 0.39% 2.69% 5.00% 0.57% -0.44%
KOTAK FLEXI DEBT 10.72 0.10% 0.45% 2.72% 5.85% 0.03% -2.10%
CHOLA TRIPLE ACE 23.40 0.10% 0.02% 1.40% 2.82% 0.57% -0.66%
(Source: Credence Analytics. NAV data as on Feb 10, 2006. Growth over 1-year is compounded annualised)

The benchmark 7.38% 2015 GOI yield closed this week (February 10, 2006) at 7.28%, up by 0.01% over last week. Bond yields are inversely related to bond prices; a rise in bond yields translates into a fall in bond prices. Principal Income (0.13%) emerged the leader closely followed by ABN Amro Flexi Debt (0.12%). LIC Bond (0.11%) took the third position with 0.10% returns.

Leading Balanced Funds
Balanced Funds NAV (Rs) 1-Wk 1-Mth 1-Yr 3-Yr SD SR
KOTAK BALANCE 24.56 4.22% 8.86% 53.09% 47.87% 5.24% 0.50%
LIC BALANCE 39.34 4.07% 7.06% 42.79% 29.80% 4.49% 0.34%
JM BALANCED 18.28 3.10% 7.40% 41.05% 32.89% 4.34% 0.33%
BOB BALANCED 22.12 2.98% 7.54% 48.56% - 5.23% 0.41%
PRINCIPAL BALANCED 19.49 2.80% 5.24% 37.93% 42.05% 4.57% 0.33%
(Source: Credence Analytics. NAV data as on Feb 10,2006. Growth over 1-year is compounded annualised)

Balanced funds benefited from the positive sentiment in the equity markets. Kotak Balanced (4.22%) led the pack. LIC Balance (4.07%) and JM Balanced (3.10%) took second and third positions respectively. Category leader HDFC Prudence (1.17%) ended this week with a reasonable performance.

With the budget only a few weeks away, anticipation is already building up in the industry. With a lot of tax sops already doled out to the mutual fund segment, investors are asking the question -- where to from here? We have tried to answer that question in our pre-budget analysis on this subject.

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    There is little time left for investors to finalise their tax-saving investments. As far as the risk-taking investor is concerned, its about time he tied up his investments in tax-saving funds. With the slew of NFOs in the offing and their astronomical collections, we suspect that a lot money that was initially set aside for these funds found its way into the NFOs. In the interest of the tax-paying investor, we hope we are wrong.

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