Equity markets showed some signs of nervousness when they dipped off their highs to register one of the sharpest falls in recent times.
But that turned out to be the briefest of corrections as markets bounced right back. At the end, the BSE Sensex closed at 7,767 points, up 0.17%, while the S&P CNX Nifty was flat at 2,362 points. The CNX Midcap closed at 3,607 points, up 1.55%.
Leading Diversified Equity Funds
| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| PRUICICI EMERGING S.T.A.R | 16.76 | 5.99% | 15.65% | 38.12% | - | 4.79% | 1.08% |
| SAHARA MIDCAP | 13.06 | 4.19% | 12.51% | 24.12% | - | 4.61% | 0.72% |
| BOB GROWTH | 21.17 | 4.13% | 11.84% | 28.79% | 77.37% | 7.50% | 0.42% |
| MAGNUM EMERGING BUS. | 21.35 | 4.10% | 15.79% | 58.27% | - | 5.40% | 1.33% |
| KOTAK MIDCAP | 13.25 | 3.97% | 13.55% | - | - | 5.32% | 0.86% |
(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.)
Given the performance of the CNX Midcap index (up 1.55% over last week), it is not surprising to find mid cap funds lead the weekly rankings. PruICICI Emerging STAR (5.99%) was the leader by a significant margin. Sahara Midcap (4.19%) came in next followed by BOB Growth (4.13%) and Magnum Emerging Business (4.10%).
Mid cap majors Franklin Prima Fund (2.12%), Sundaram Select Midcap (2.07%) and Magnum Global (1.80%) seemed to have lost that fizz this week.
Large cap majors Franklin Bluechip (0.47%), HSBC Equity (1.35%) and HDFC Top 200 (0.76%) registered moderate gains given the lukewarm performance of the broad-based indices.
Index funds were launched with much fanfare. A portfolio strategy that mirrors a benchmark index, giving returns in line with the index in a cost-effective manner, are the most striking traits of an index fund.
While index funds have done very well for themselves in the US, Indian investors haven't really taken to them like a fish to water. There are several reasons for the lukewarm response to index funds. Personalfn has done a study to analyse some of these reasons.
Leading Debt Funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| DEUTSCHE DYN. BOND | 10.41 | 0.67% | 0.98% | 1.58% | 6.40% | 0.89% | -0.39% |
| SAHARA INCOME | 11.98 | 0.36% | 0.64% | 2.35% | 4.53% | 0.80% | -0.33% |
| PRUICICI FLEXIBLE INC. | 12.50 | 0.32% | 0.79% | 2.94% | 5.73% | 0.75% | -0.29% |
| DEUTSCHE PREM. BOND | 11.61 | 0.18% | 1.14% | 4.28% | 7.11% | 1.00% | -0.14% |
| ING VYSYA SEL. DEBT | 10.54 | 0.15% | 0.55% | 3.17% | - | 0.22% | -0.39% |
Surge in global oil prices to $66 per barrel was one of the more significant developments last week. There is a hike proposed even in domestic petrol prices. The yield on the 10-Yr benchmark GOI paper closed at 7.05% (August 12, 2005), 5 basis points above the previous week's close. Rising yields translate into a fall in bond prices, leading to a slump in debt fund NAVs (net asset values). Deutsche Dynamic Bond (0.67%) and Sahara Income (0.36%) were the leading debt funds this week.
Leading Balanced Funds
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| CANBALANCE | 22.64 | 2.45% | 5.51% | 8.39% | 23.16% | 4.08% | 0.22% |
| BOB BALANCED | 18.50 | 2.44% | 9.53% | 23.32% | 58.61% | 5.69% | 0.42% |
| TATA BALANCED | 33.45 | 2.02% | 5.26% | 13.96% | 49.21% | 5.59% | 0.45% |
| PRUICICI BAL | 23.43 | 1.99% | 5.63% | 16.81% | 46.11% | 4.89% | 0.46% |
| MAGNUM BALANCED | 23.12 | 1.87% | 8.32% | 23.04% | - | 3.56% | 0.85% |
Balanced funds did well for themselves with Canbalance (2.45%) and BOB Balanced (2.44%) closely vying for the leading spot. Tata Balanced (2.02%) and PruICICI Balanced (1.99%) occupied the third and fourth positions respectively. Category leader HDFC Prudence (1.30%) had an average week.
The NFO (new fund offers) season is far from over. After what seemed like a lull, there is another spate of NFOs. This week we have covered PruICICI Infrastructure Fund.
As is evident from its name, the fund will invest largely in equities from the infrastructure sector. What distinguishes it from a typical sector fund is a more inclusive definition of infrastructure.
The fund house has taken the liberty of including sectors like banking and financial services among a host of others for defining infrastructure. Consequently the fund is likely to be less concentrated vis-à-vis a typical infrastructure sector fund.
Another NFO is the Reliance Tax Saver. Reliance Mutual Fund schemes have performed very impressively over the years and there is much investor anticipation about its tax-saving offering.
Which brings us to the subject of tax-saving mutual funds (ELSS). With a little over 6 months left for March 2006, if you haven't already starting building a tax-saving mutual fund portfolio, we strongly recommend that you start now.
Of all things, the high market level should not act as a deterrent. We continue to believe that even at this level, equity markets have the potential to offer superior risk-adjusted returns (vis-à-vis comparable assets) over a 3-Yr time frame. And as always, we continue to advocate that you take the systematic investment plan (SIP) route to investing in equity funds at this stage.
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