July 2005 will arguably go down in the history of equity markets as the month when a lot of records were set.
Equity markets rocketed and touched records high with alarming regularity. The BSE Sensex posted a monthly gain of 6.14% to end at 7,635 points, while the S&P CNX Nifty appreciated by 4.13% during the month and closed at 2,312 points.
Leading Diversified Equity Funds
| Diversified Equity Funds | NAV (Rs) | 1-Mth | 6-Mth | 1-year | 3-year | SD | SR |
| DISCOVERY STOCK | 13.14 | 16.28% | 45.19% | 122.71% | 48.11% | 9.34% | 0.46% |
| MAGNUM EMERGING BUS. | 19.44 | 16.20% | 56.40% | - | - | 7.27% | 0.92% |
| PRUICICI DYNAMIC PLAN | 33.40 | 15.04% | 31.40% | 87.37% | - | 7.75% | 0.45% |
| MAGNUM MULTIPLIER PLUS | 25.10 | 14.66% | 31.49% | 91.78% | 58.25% | 8.06% | 0.96% |
| TAURUS STARSHARE | 22.12 | 14.32% | 34.06% | 95.58% | 56.54% | 8.23% | 0.50% |
(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.)
Investors in the diversified equity funds segment had much reason to cheer with the equity markets in a buoyant mood. The top performers list was dominated by funds investing largely in the mid cap segment and those with a flexible investment style.
Discovery Stock (16.28%) emerged the monthly topper; two funds from SBI Mutual Fund i.e. Magnum Emerging Business (16.20%) and Magnum Multiplier Plus (14.66%) also featured in the list.
Mid-cap majors clocked impressive performances during the month -- Sundaram Select Midcap (12.23%), Franklin Prima (10.93%) and Magnum Global (10.72%). It was a good month for the large cap category leaders as well -- HSBC Equity (10.67%), Franklin India Bluechip (9.17%) and HDFC Top 200 (7.11%); albeit they failed to match their peers from the mid cap segment.
As per the Securities and Exchange Board of India Web site, mutual funds which were net sellers (Rs 18,168 million) in equities last month, bought more than they sold (Rs 3,927 million) in the month of July.
A study conducted by Personalfn this month revealed that a number of diversified equity funds are holding sectorally concentrated portfolios. While the same could be a strategy to clock superior growth, investors should be aware that such a move exposes them to disproportionately higher risk levels.
The investment advisor has a key role to play in making investors aware of such important developments. A smart investment advisor not only helps investors curtail the downside when the markets hit a rough patch; his advise often plays an important role in aiding investors successfully ride a bull run.
Leading Debt Funds
| Debt Funds | NAV (Rs) | 1-Mth | 6-Mth | 1-year | 3-year | SD | SR |
| TATA INCOME PLUS | 11.67 | 1.40% | 4.61% | 5.17% | - | 0.73% | -0.27% |
| ABN AMRO FLEXI DEBT | 10.40 | 1.18% | - | - | - | 0.43% | -0.37% |
| GRINDLAYS DYNAMIC BOND | 12.43 | 0.73% | 3.47% | 3.07% | 7.19% | 0.76% | -0.31% |
| UTI BOND FUND | 20.19 | 0.64% | 6.94% | 9.43% | 7.29% | 0.83% | -0.10% |
| UTI - BOND ADVANTAGE | 10.75 | 0.60% | 3.32% | 4.87% | 6.19% | 0.88% | -0.30% |
A key event this month was the release of the First Quarter Review of the Annual Monetary Policy by the Reserve Bank of India.
Although the general perception was that the RBI would nudge interest rates upwards, there was no such development. Not surprisingly, the debt markets rallied; the same is reflected in the monthly performance of debt funds.
Tata Income Plus (1.40%) powered by a strong performance surfaced as the top performing debt fund; ABN Amro Flexi Debt (1.18%) and Grindlays Dynamic Bond (0.73%) occupied second and third positions respectively. A noteworthy feature in the debt funds segment was the dominance of "dynamic" style funds viz. funds with a flexible investment style that permits investments across various debt instruments.
Leading Balanced Funds
| Balanced Funds | NAV (Rs) | 1-Mth | 6-Mth | 1-year | 3-year | SD | SR |
| KOTAK BALANCE | 19.66 | 9.86% | 21.93% | 58.30% | 39.32% | 5.65% | 0.49% |
| MAGNUM BALANCED | 22.10 | 9.84% | 23.74% | - | - | 3.63% | 1.01% |
| HDFC PRUDENCE | 70.14 | 9.34% | 23.61% | 56.18% | 47.50% | 4.69% | 0.59% |
| ING BAL | 13.30 | 8.75% | 17.60% | 45.36% | 30.68% | 5.25% | 0.42% |
| PRUICICI BAL | 22.37 | 8.43% | 17.61% | 44.79% | 35.91% | 5.38% | 0.44% |
Investors in the balanced funds segment had no reason to complain as balanced funds drew from the surge in the equity markets. Kotak Balance (9.86%) was the monthly topper closely followed by Magnum Balanced (9.84%) and category leader HDFC Prudence (9.34%).
With equity markets touching record highs, one question bothering most investors is whether this is the right time to get invested. We believe that investors with a long-term investment horizon (atleast 3 years) and an appetite for handling the risk and volatility associated with equity-oriented instruments can consider getting invested at this stage.
However, the tenure of investment and risk appetite are the key factors. Also, as always, investments must be made using the systematic investment plan (SIP) route.
On the contrary, if you are an investor whose investment objective has been achieved or who got invested simply to make a quick buck, this would be a good time to book profits.
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