It was another good month for investors as equity markets surged northwards and touched record highs. The BSE Sensex posted a gain of 14.73% during the month to close at 19,838 points; the S&P CNX Nifty appreciated by 17.53% to settle at 5,901 points. The CNX Midcap rose by 8.49%, before settling at 7,450 points. However, these numbers conceal the intense volatility that was experienced during the month.
During the month, Foreign Institutional Investors (FIIs) were net buyers of equities with purchases of Rs 173,254 m (as on October 31, 2007). On the contrary, mutual funds were net sellers to the tune of Rs 17,996 m. This is not surprising since the P Notes clarification worked like a shot in the arm for the FIIs.
Investing in mutual funds has become increasingly popular among retail investors. This has given rise to investment experts who regularly dole out advice to investors. While this advice is quick to point out how investors must select the 'right' mutual funds, this hasn't quite stemmed the mis-selling in the industry. As a result many investors end up investing in the wrong investment avenue despite advice to the contrary. One reason for this could be that the advice doing the rounds instructs investors on how to evaluate mutual funds, it does not for instance, tell them how not to evaluate funds. A lot of the mis-selling happens because investors select mutual funds for the wrong reasons.
For instance, while evaluating mutual funds, investors often look closely at the past performance, mutual fund ratings and the star fund manager among other parameters. Although some of these parameters are important, they only reveal half the story; for the other more important half, investors must evaluate qualitative factors like investment processes and approach.
How not to evaluate mutual funds
|
Equity Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
Reliance Power |
72.77 |
27.66% |
90.37% |
127.92% |
9.87% |
0.55% |
|
Sundaram Capex Opp |
30.34 |
24.02% |
76.64% |
89.74% |
9.92% |
0.47% |
|
Sundaram Select Focus |
100.71 |
22.39% |
65.79% |
78.87% |
7.30% |
0.50% |
|
Canara Infrastructure |
24.94 |
21.78% |
75.63% |
91.26% |
9.89% |
0.39% |
|
UTI Infrastructure |
46.55 |
21.64% |
62.42% |
85.16% |
9.80% |
0.47% |
Sector funds dominated proceedings in the equity funds segment. Reliance Power (27.66%) led the pack, followed by Sundaram Capex Opportunities (24.02%). Another fund from Sundaram BNP Paribas Mutual fund i.e. Sundaram Select Focus (22.39%) also featured among top performers.
|
Debt Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
Reliance Income |
24.70 |
1.93% |
6.24% |
7.79% |
0.58% |
-0.03% |
|
ICICI Pru Income |
23.68 |
1.92% |
6.98% |
8.45% |
0.89% |
-0.02% |
|
Birla Sun Life Income |
28.34 |
1.76% |
8.30% |
12.93% |
0.74% |
0.28% |
|
Birla Income Plus |
33.33 |
1.76% |
9.37% |
10.83% |
0.92% |
0.11% |
|
Kotak Bond |
20.91 |
1.71% |
6.34% |
9.00% |
0.47% |
0.12% |
Reliance Income (1.93%) occupied the top slot in the long-term debt funds segment; ICICI Prudential Income (1.92%) came in at a close second position. Birla Sun Life Income (1.76%) and Birla Income Plus (1.76%) both funds from the same fund house i.e. Birla Sun Life Mutual Fund, shared the third position in the top performer's list.
|
Balanced Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
BOB Balanced |
33.90 |
24.91% |
44.56% |
48.75% |
8.68% |
0.29% |
|
ING Balanced |
24.57 |
13.17% |
31.04% |
40.32% |
5.88% |
0.32% |
|
Canara Balanced II |
52.14 |
13.05% |
38.93% |
40.88% |
5.88% |
0.31% |
|
Tata Balanced |
71.44 |
12.99% |
37.17% |
54.42% |
6.67% |
0.43% |
|
Kotak Balance |
29.98 |
12.92% |
35.06% |
42.62% |
6.24% |
0.40% |
BOB Balanced (24.91%) occupied the top slot in the balanced funds category. ING Balanced (13.17%) and Canara Balance II (13.05%) also featured in the top performers' list.
With less than 6 months left for the financial year, tax-planning assumes priority for most investors. Among various tax-saving investment avenues like National Savings Certificate (NSC), Public Provident Fund and tax-saving funds (also referred to as Equity-Linked Saving Schemes -- ELSS), the latter have emerged as favourites for risk-taking investors. To help investors in selecting the right tax-saving fund, we have a note on how this can be achieved in 5 steps.
How to select a tax-saving fund
At Personalfn, we have always maintained that tax-planning is no different from financial planning and deserves a great deal of thought. Tax-planning is as much about contributing to your financial goals as it is about reducing the tax liability. Hence, investors must start tax-planning well in advance i.e. from day one of the financial year, instead of postponing it till the end.
By Personalfn, a financial planning initiative. Your Free Guide to Financial Planning is just a click away! Get it now!
