The New Year saw stock markets continue from where they signed off last year. The BSE Sensex appreciated by 1.41% to close at 14,057 points; the S&P CNX Nifty rose by 1.73% to close at 4,052 points. However, performance of CNX Midcap was rather muted as it closed at 5,228 points, up by 0.29%. Meanwhile, there was no letup as far as NFO (new fund offer) launches were concerned.
Investors' fascination with sector/thematic funds never ceases to amaze us. It's almost as if investors are convinced that only thematic funds can identify these opportunities and diversified equity funds are unaware of them. Thematic funds take on higher risks because they do not diversify across themes/sectors.
As a result, their fortunes are interlinked with those of the underlying theme/sector. Once the rug is pulled from under their feet (read market crash), such funds find it a challenge to survive since they do not have alternative investment themes.
For a diversified equity fund, it's a lot easier since they have a range of themes/sectors to choose from and can migrate to another theme once the fund manager is convinced that a particular theme has lost its charm.
Since infrastructure funds have been in the limelight for some time now, we pitted them against diversified equity funds to understand if they have delivered the performance that was expected of them. To be sure, infrastructure funds have done well over their short tenures (most of them have a history of less than 2 years).
However, they have taken on considerable risk in the process. At Personalfn, we have observed that thematic/sector funds perform well over shorter time frames; over the long-term (3-5 years), they are no match for diversified equity funds. Moreover, investors have to be well-informed to ensure that they enter and exit the thematic fund at the right time.
Leading open-ended diversified equity funds
| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| Discovery Stock | 16.77 | 3.84% | 18.02% | 49.47% | 18.85% | 10.91% | 0.24% |
| Magnum Comma | 16.57 | 2.09% | 9.16% | 33.63% | 41.02% | 9.96% | 0.27% |
| Kotak MNC | 27.02 | 2.04% | 7.16% | 25.30% | 12.75% | 7.53% | 0.30% |
| Escorts Growth | 55.88 | 1.84% | 6.28% | 26.16% | 29.73% | 8.56% | 0.35% |
| PruICICI Dynamic | 67.35 | 1.66% | 9.51% | 44.50% | 56.40% | 8.10% | 0.49% |
(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.)
In the diversified equity funds segment, Discovery Stock (3.84%) took the top honors, followed by Magnum Comma (2.09%). Kotak MNC (2.04%) also featured among the weekly top performers.
The NFO fever refuses to abate. We covered two funds this week -- both from Sundaram BNP Paribas Mutual Fund. The first -- Sundaram Select Small Cap -- is a 5-year close-ended fund. As the name suggests, the fund will comb for investment opportunities in small caps, a relatively high-risk investment segment.
The second -- Sundaram Equity Multiplier Fund -- is a 3-year close-ended, flexi-cap/opportunities fund that can invest across market segments (large caps, mid caps and small caps) and sectors.
Leading open-ended long-term debt funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| Templeton Income | 25.62 | 0.27% | 0.20% | 2.96% | 4.02% | 0.39% | -0.51% |
| HSBC Income | 12.37 | 0.24% | 0.38% | 3.75% | 5.27% | 0.26% | -0.58% |
| ING Income | 18.13 | 0.23% | 0.63% | 2.76% | 4.00% | 0.24% | -0.93% |
| Templeton Inc. Builder | 24.97 | 0.17% | 0.05% | 3.81% | 3.66% | 0.70% | -0.14% |
| PruICICI LTP | 15.38 | 0.17% | 0.41% | 3.33% | 6.35% | 0.32% | 0.14% |
Templeton Income (0.27%) occupied the top slot in the long-term debt funds segment. HSBC Income (0.24%) and ING Income (0.23%) came in at second and third positions respectively. Another fund from Franklin Templeton Mutual Fund i.e. Templeton Income Builder (0.17%) also made it to the top performers' list.
Leading open-ended balanced funds
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| Escorts Balanced | 47.51 | 1.69% | 6.19% | 23.25% | 27.24% | 5.69% | 0.40% |
| Sundaram Balanced | 33.06 | 1.55% | 6.37% | 23.84% | 24.18% | 5.25% | 0.33% |
| ING Balanced | 18.54 | 1.37% | 5.64% | 25.19% | 19.92% | 5.80% | 0.31% |
| PruICICI Balanced | 35.35 | 1.17% | 6.93% | 26.07% | 28.41% | 5.50% | 0.42% |
| UTI Variable Invest | 16.45 | 1.07% | 3.57% | 9.35% | 13.39% | 2.33% | 0.31% |
Escorts Balanced (1.69%) surfaced as the top performer in the balanced funds segment, followed by Sundaram Balanced (1.55%). ING Balanced (1.37%) came in at third position.
With markets on the rise, it is even more important for investors to be wary of the novel investment opportunities on offer (read NFOs). While we believe that stock markets are well-placed to return 15% compounded annualised growth (CAGR) over a 3-year period, it does not mean that any equity fund will do the job.
It is even more pertinent now for investors to evaluate every investment critically so as to not end up with the wrong fund. If you are incapable or too preoccupied to do this evaluation on your own, it's time you approached a professional financial planner.
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