Mutual fund investors have had little reason to complain in recent times with equity markets on a seemingly ceaseless northward journey. September 2005 was no different with benchmark indices setting record highs yet again.
The BSE Sensex posted a monthly gain of 10.62% to close at 8,634 points, while S&P CNX Nifty ended the month at 2,601 points (up by 9.06%). Conversely, the CNX Midcap rose by a modest 3.93% to close at 3,807 points. Another noteworthy feature was the intense volatility experienced by markets during the month.
Leading Diversified Equity Funds
| Diversified Equity Funds | NAV (Rs) | 1-Mth | 6-Mth | 1-Yr | 3-Yr | SD | SR |
| GIC D'MAT | 22.57 | 10.75% | 39.67% | 61.44% | 46.49% | 6.50% | 0.38% |
| HDFC TOP 200 | 69.90 | 10.02% | 31.34% | 65.05% | 67.40% | 6.92% | 0.43% |
| HDFC EQUITY | 93.06 | 9.57% | 35.93% | 70.13% | 67.45% | 6.50% | 0.47% |
| HDFC CORE & SATELLITE | 17.18 | 9.40% | 36.83% | 68.73% | - | 4.57% | 0.84% |
| DSP ML TOP 100 | 34.91 | 9.37% | 28.82% | 55.57% | - | 7.05% | 0.39% |
(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 HDFC Mutual Fund dominated proceedings in the diversified equity funds segment. GIC D'Mat (10.75%) surfaced as the top performer followed by category leader HDFC Top 200 (10.02%).
HDFC Equity (9.57%) and HDFC Core & Satellite (9.40%) also featured in the top performers' list. Other category leaders, HSBC Equity (7.94%) and Franklin India Bluechip (7.75%) delivered a good performance.
It was a rather subdued month for the mid cap majors; however Magnum Global (7.03%) bucked the trend and clocked impressive returns. Sundaram Select Midcap (2.85%) and Franklin Prima (2.71%) had a poor month.
Meanwhile fund houses continued to launch new fund offers (NFOs); however we have noticed a perceptible change in the offerings. This month we profiled two schemes with a bias for large cap stocks i.e. Birla Top 100 and Principal Large Cap Fund. This is in contrast to flexi cap and mid cap funds which have ruled the roost recently. Interestingly, we are yet to see a balanced fund NFO in the present bull run.
Despite the advantages that a balanced fund can offer in terms of diversification across asset classes (equities and debt) among others, the segment has been given the cold shoulder by fund houses.
Leading Debt Funds
| Debt Funds | NAV (Rs) | 1-Mth | 6-Mth | 1-Yr | 3-Yr | SD | SR |
| DEUTSCHE PREM. BOND | 11.71 | 0.59% | 4.76% | 5.98% | - | 0.79% | -0.33% |
| LIC BOND | 18.68 | 0.51% | 2.44% | 4.63% | 5.77% | 0.53% | -0.65% |
| ING VYSYA INCOME | 17.28 | 0.47% | 2.37% | 3.99% | 5.28% | 0.60% | -0.66% |
| MAGNUM INCOME | 18.85 | 0.46% | 2.90% | 4.40% | 5.54% | 0.64% | -0.63% |
| ING VYSYA SELECT DEBT | 10.62 | 0.45% | 3.21% | 5.66% | - | 0.16% | -0.49% |
Deutsche Premier Bond (0.59%) emerged as the top performing debt fund followed by LIC Bond (0.51%). ING Vysya Income (0.47%) and ING Vysya Select Debt (0.45%) also featured in the list.
Popular perception suggests that the debt funds segment is 'history' and incapable of offering lucrative returns; however such an assessment is erroneous. Dynamic debt funds merit attention in the present seemingly dire conditions.
Simply put, dynamic debt funds are regular debt funds with a flexible investment style i.e. they invest across a variety of debt instruments ranging from corporate paper, government securities to money market instruments. Also dynamic debt funds actively manage the portfolio's maturity and risk profile to clock superior growth.
Leading Balanced Funds
| Balanced Funds | NAV (Rs) | 1-Mth | 6-Mth | 1-Yr | 3-Yr | SD | SR |
| ESCORTS BALANCED | 33.82 | 7.48% | 26.18% | 49.39% | 42.01% | 5.41% | 0.41% |
| DSP ML BALANCED | 26.87 | 5.75% | 20.17% | 39.01% | 44.21% | 4.25% | 0.46% |
| HDFC PRUDENCE | 78.01 | 5.58% | 28.94% | 57.82% | 54.73% | 4.43% | 0.56% |
| PRINCIPAL BALANCED | 17.16 | 4.95% | 19.83% | 42.52% | 39.36% | 4.66% | 0.40% |
| BIRLA BALANCE | 20.83 | 4.83% | 17.42% | 35.44% | 37.29% | 4.80% | 0.31% |
Balanced funds drew from the conducive conditions in the equity markets. Escorts Balanced (7.48%) scored over its balanced fund peers by a significant margin. DSP ML Balanced (5.75%) occupied second position, while category leader HDFC Prudence (5.58%) came in at third position.
With equity markets on the rise and a plethora of investment opportunities available, one question that retail investors frequently put forth is "where should I get invested?"
The solution perhaps lies in the investor's asset allocation. Asset allocation is one of the fundamentals of financial planning and entails being invested in a range of asset classes like equities, debt, property and gold among others in various proportions. The investor's risk profile and investment objective determine the holdings in each asset class.
Our advice to investors -- consult your investment advisor and chalk out an asset allocation plan. Once you have the right asset allocation and credible advice, the investments will fall in place!
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