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Mutual Fund Roundup: August 2007
August saw equity markets close in negative terrain.
The BSE Sensex shed 1.49% during the month to close at 15,319 points;
the S&P CNX Nifty posted a loss of 1.44% to close at 4,464 points. The
CNX Midcap dipped 2.17% to settle at 6,044 points. Of course, while in
the end, the numbers indicate a sedate performance, make no mistake that
there was plenty of volatility along the way mainly from the sub-prime
problem.
In August 2007, Foreign Institutional Investors (FIIs)
were net sellers of equities with sales of Rs 48,686 m (as on August 30,
2007). On the contrary mutual funds were net buyers to the tune of Rs
30,098 m.
Over time we have had repeated requests from visitors
to unravel how the mutual fund growth and dividend options work. We
wrote an article to address this issue. Broadly, growth and dividend are
the two options offered at the time of investment. Since the growth NAV
is higher then the dividend NAV, investors mistakenly believe that they
have a better chance of clocking higher returns with the growth option
as opposed to the dividend option. However the reason for the difference
in the NAVs (of the growth and dividend options) has nothing to do with
the performance of the two options, rather it’s all related to the
dividends paid out under the dividend option (assuming that both options
have the same portfolios).
Leading open-ended equity funds
| Equity
Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
3-Yr |
| JM
Emerging Leaders |
13.55 |
6.04% |
35.63% |
27.20% |
- |
| Escorts
Growth |
66.83 |
2.37% |
29.00% |
35.36% |
45.34% |
| JM HI FI |
12.48 |
1.51% |
31.88% |
32.31% |
- |
| Reliance
Power |
49.12 |
1.13% |
40.16% |
77.30% |
66.48% |
| ICICI Pru.
FMCG |
44.47 |
0.82% |
14.05% |
20.84% |
51.74% |
|
(Source: Credence Analytics. NAV data as on
August 31, 2007.) |
JM Emerging Leaders (6.04%) emerged as the best
performer in the equity funds segment, followed by Escorts Growth
(2.37%) and JM HI FI (1.51%). Reliance Power (1.13%), a sector fund,
also featured among the top performers.
Leading open-ended long-term debt funds
| Debt
Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
3-Yr |
| Principal
Gilt IP |
16.71 |
0.92% |
4.26% |
5.81% |
5.46% |
| ICICI Pru.
Long Term |
16.19 |
0.80% |
4.24% |
7.74% |
9.23% |
| Birla Gilt
Plus |
24.56 |
0.77% |
5.36% |
10.52% |
6.34% |
| ICICI Pru.
Floating |
12.03 |
0.66% |
4.11% |
7.74% |
6.20% |
| HSBC
Floating |
11.90 |
0.64% |
4.58% |
8.04% |
- |
|
(Source: Credence Analytics. NAV data as on
August 31, 2007.) |
Principal Gilt IP (0.92%) occupied top slot in the
long-term debt funds segment. ICICI Prudential Long Term (0.80%) and
Birla Gilt Plus (0.77%) came in at second and third positions
respectively. Another fund from ICICI Prudential Mutual Fund i.e. ICICI
Prudential Floating (0.66%) also featured in the list.
Leading open-ended balanced funds
|
Balanced Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
3-Yr |
| JM
Balanced |
27.84 |
1.61% |
26.52% |
38.02% |
36.02% |
| Escorts
Balanced |
55.14 |
0.32% |
22.19% |
29.68% |
35.81% |
| UTI
Variable Investment |
17.53 |
-0.33% |
10.79% |
12.16% |
16.14% |
| Birla Sun
Life 95 |
209.77 |
-0.68% |
20.00% |
36.29% |
36.00% |
| Canbalance
|
31.45 |
-1.08% |
16.60% |
22.13% |
18.83% |
|
(Source: Credence Analytics. NAV data as on
August 31, 2007.) |
JM Balanced (1.61%) led the pack in the balanced
funds category, followed by Escorts Balanced (0.32%) and UTI Variable
Investment (-0.33%).
At Personalfn, we have never been advocators of new
fund offers (NFOs). Our philosophy is that NFOs being an untested entity
must first be evaluated across various parameters over the long-term (at
least 3 years) before investors consider investing in them. Meanwhile
investors should opt for existing, well established funds with a proven
track record over the long-term. Also, we believe that an NFO should be
considered only if it offers an investment proposition that is distinct
from existing funds.
This month we evaluated two funds; one we had
refrained from recommending at the NFO stage, while the other was
recommended by us during the NFO period.
Sundaram Rural India Fund (SIRF) was one of the more
popular NFOs launched in 2006. Our view then was that investors should
give the SRIF NFO a miss. Instead we had advised investors to invest in
conventional diversified equity funds with proven track records. Our
note on SRIF bears out our recommendation to investors during the NFO
period.
Our view on Fidelity Equity Fund (FEF) was that
albeit an NFO, given Fidelity’s track record in global markets and its
team-based investment approach, investors could invest in it from an AMC
(asset management company) diversification perspective. Again, our view
on FEF (during its NFO period) is borne out by its performance so far.
In our view, investors must regularly re-evaluate
their NFO investments. A lot of NFOs were mis-sold and we frequently
come across clients who request us to re-assess their NFO-heavy
portfolios. Our recommendation to them is straightforward – sell the NFO
and book your losses now before you lose more money on it; invest the
redemption proceeds in existing funds with well established track
records over the long-term.
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