The BSE Sensex scaled an all-time high of 12,000 points to close at 12,030 points (a blistering 7.06% appreciation). The S&P CNX Nifty climbed to 3,573 points (up 6.78%), while the CNX Midcap closed at 4,954 points (up 4.0%).
You would think that with the passage of time and so much global attention being drawn towards domestic stock markets, there would be a semblance of maturity in the products being launched for the retail investor.
At least, a close-ended mutual fund NFO (new fund offer) that targets stock IPOs (initial public offerings) to make some quick money on listing, is not our idea of a mature investment offering. Events like these make us wonder if the mutual fund industry isn't actually regressing from bad to worse.
Standard Chartered Mutual Fund has launched a 3-year close-ended diversified equity fund Standard Chartered Enterprise Equity Fund that will invest pre-dominantly in stock IPOs. To clock some quick gains for the investor it may even sell the IPO on listing.
Selling an IPO on listing is a strategy (if you can call it that) that the most gullible of investors have been pursuing since the Harshad Mehta days (in 1992). When the same strategy is adopted by a mutual fund, you begin to wonder if, 14 years and 8,000 points later, the investor and the investing environment have matured at all.
The most amazing aspect of this NFO in our view is that while the mutual fund may clock quick gains for the investor on listing, it will allow them to redeem only after 3 years (remember it's close-ended although it does allow redemption at an exit load).
This is a rather strange combination of a short-term investment strategy for the fund manager and a long term investment strategy for the NFO investor! So after 3 years you may well have a situation where all the gains on IPO listing are frittered away because the stock markets are in the midst of a bear phase, which will leave the fund manager with nothing to show for his brilliant IPO investment strategy.
Try as we might, we can't think of one good reason why this fund should be close-ended any more than Standard Chartered Classic Equity Fund should be open-ended.
Unless of course SEBI's (Securities and Exchange Board of India) latest directive allowing close-ended equity funds to charge initial issue expenses has anything to do with it.
Leading Diversified Equity Funds
| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| DEUTSCHE ALPHA EQUITY | 50.85 | 8.31% | 23.57% | 72.02% | 104.05% | 6.53% | 0.46% |
| PRUICICI DYNAMIC | 56.92 | 7.41% | 12.15% | 62.34% | 116.50% | 6.65% | 0.60% |
| SUNDARAM SELECT FOCUS | 56.25 | 7.36% | 13.63% | 68.09% | 110.63% | 6.15% | 0.49% |
| STANCHART CLASSIC EQUITY | 15.24 | 7.17% | 11.81% | 49.27% | - | 6.83% | 0.56% |
| PRUICICI POWER | 73.91 | 6.95% | 11.04% | 61.34% | 105.36% | 6.21% | 0.54% |
(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.)
Deutsche Alpha Equity (8.31%) clocked impressive growth. PruICICI Dynamic (7.41%) and Sundaram Select Focus (7.36%) were a distant second and third respectively.
Our preferred funds -- Sundaram Growth (5.92%), HDFC Top 200 Fund (4.64%) failed to match their peers or even the Sensex.
Leading Debt Funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| PRINCIPAL INCOME | 16.56 | 0.45% | 0.97% | 2.18% | 5.27% | 0.55% | -0.58% |
| HDFC INCOME FUND | 16.23 | 0.40% | 0.77% | 0.34% | 2.68% | 0.64% | -0.71% |
| TEMPLETON INC BUILDER | 24.1 | 0.39% | 1.05% | 0.54% | 2.75% | 0.64% | -0.72% |
| HDFC HIGH INTEREST | 23.85 | 0.38% | 0.84% | 0.50% | 2.80% | 0.68% | -0.67% |
| BIRLA INCOME PLUS | 29.06 | 0.33% | 0.74% | 1.64% | 3.97% | 0.63% | -0.69% |
Principal Income (0.45%) and HDFC Income (0.40%) were the leading debt funds over the week.
This week saw the announcement of the Monetary Policy (as well as the Economic Review). In a move that caught many by surprise, the Reserve Bank of India (RBI) did not raise interest rates on the key variables (CRR and repo rate).
However, at Personalfn we maintain that over the short term interest rates are likely to rise. To understand how the latest Monetary Policy is likely to impact your debt and equity investments, as also home loans, read this.
Leading Balanced Funds
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 1-year | 3-year | SD | SR |
| JM BALANCED | 21.09 | 5.34% | 8.60% | 63.49% | 40.22% | 4.67% | 0.41% |
| FT INDIA BALANCED | 29.73 | 4.76% | 8.62% | 57.64% | 47.47% | 4.24% | 0.42% |
| PRUICICI BAL | 32.22 | 4.34% | 8.16% | 65.23% | 50.03% | 4.43% | 0.51% |
| MAGNUM BALANCED | 24.1 | 4.24% | 8.22% | 78.52% | 66.90% | 3.51% | 1.08% |
| HDFC BALANCE | 29.77 | 3.90% | 6.44% | 51.06% | 42.43% | 4.04% | 0.44% |
JM Balanced Fund (5.34%) was the most impressive fund, followed by FT India Balanced (4.76%) and PruICICI Balanced (4.34%).
We recommend that investors use this lull in the NFO market to their advantage. It's about time they shifted their focus back to existing mutual funds with established track records. In any case, the quality of most NFOs that we are witnessing at present, do not inspire too much confidence.
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