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July 4, 2000

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Best and worst funds of June

Dhirendra Kumar

Equity markets

The last quarter has certainly been one of the most turbulent quarters in recent memory. The Sensex lost close to 5 per cent since the beginning of this year and most of the erosion came in the last quarter. However, things could have been worse but for the smart rally in June which lifted the Sensex by over 7 per cent. Initially, the fast moving consumer goods (FMCG) and cyclical stocks led the rally but soon, the technology stocks took charge after Nasdaq pierced the 4000-mark barrier. The I-Sec Software Index ended the month with a 15 per gain last month.

The markets were also expecting the government to deliver on the vexed issue of divestment which turned out to be a disappointment.

Going further, the market is expected to move in a turbulent zone with new margins coming into effect. The first quarter results will also drive the sentiment on the bourses. With the markets on a revival course, the mutual funds and foreign institutional investors have been booking profits in a rising market.

Equity Diversified

Diversified equity funds on an average gained close to 13 per cent. A large number of June toppers are concentrated funds with a predominant exposure to the infotech, communication and entertainment (ICE) sector. If you feel tempted by their returns this month, remember that these are the very funds that faced the brunt in the falling market. Also, their resurgence today is only partly going to suffice for the erosion sustained earlier in the quarter.

ING Growth Portfolio tops the charts with a near 30 per cent gain last month. This is not surprising considering one of its top constituents, Wipro, gained close to 68 per cent last month. Tata Pure Equity Fund ranks second with a return of 22.78 per cent last month. Buoyed by the performance, the fund has declared a dividend of 20 per cent with a record dated of July 19, 2000. With markets rebounding, it is not surprising to find any losers in this league.

Top gainers 1-month return (%)
ING Growth Portfolio 29.43
Tata Pure Equity 22.78
JM Equity (G) 22.63
Alliance Equity 21.07
Magnum Multiplier Plus 20.73
Magnum Global 19.93
Grandmaster 18.73
Master Growth 18.53
Birla Advantage 18.51
Magnum Equity 16.93
Category Average 12.91
No losers  

Equity - Tax Planning

Tax planning schemes have also gained and the group has posted an average return of 15 per cent last month. The toppers again have a predominant exposure to the ICE sector. UTI Equity Tax Planning Scheme emerges the topper with a 26.08 per cent gain in June.

Top gainers 1-month return (%)
UTI EquityTax Saving Plan - 2000 26.08
Magnum Taxgain 22.83
Birla Equity Plan 20.00
Category Average 15.00
No losers  

Equity - Balanced

Balanced funds which have exposure to both equity and debt instruments, posted an average gain of 9.73 per cent. The top gainers for this month are the aggressively managed balanced funds. Not only do these funds have a higher allocation to equity but also an aggressive investment in the ICE sector. Magnum Balance, which has been the top gainer with a 15.07 per cent rise, has close to 70 per cent exposure to equity and a whopping 56 per cent in the ICE sector. Canganga, which is second in the league with a 14.88 per cent gain, has a 45 per cent exposure to ICE stocks.

This group has a surprise loser in Unit Scheme '95, which has posted a negative return of 0.26 per cent in the last month. While it is difficult to comment in the absence of the recent portfolio, the fund could have suffered because of its inclination to park in debt instruments, which faced turbulent markets in the last month.

Top gainers 1-month return(%)
Magnum Balanced 15.07
Canganga 14.88
Tata Balanced 14.34
Alliance '95 13.42
Canpremium(RO) 12.94
Category Average 9.73
Top loser 1-month return (%)
Unit Scheme '95 -0.26

Debt

The picture in the debt markets was a perfect foil to its April levels and the markets lost almost a third of the gains witnessed in April in the last two months. There were concerns on the government's borrowing programme, rising inflation and volatility in the rupee. Also, our good old economy signposts - industrial production and tax collections were on the rise, suggesting a confirmed, although slow paced recovery. This means an increase in demand from credit from the corporate sector. Add to this, the markets moved to a new lending mechanism, whereby interest rates would henceforth be market determined. The new mechanism gave jitters to the debt market, as there was a demand-supply mismatch in the system.

All these signals led to a hardening of interest rates marked by high volatility. The issue was not one of uncertainty but it is the Reserve Bank of India, which has refused to yield to market expectations. When interest rates harden, the prices of underlying securities move down. And this impact is more pronounced in the longer dated instruments than in the shorter dated securities.

The markets had turned bearish on the longer end in May itself and most fund managers swiftly moved their portfolios from longer to the shorter end of the market. If many still managed to post positive returns, it was primarily because of their active fund management. Almost all funds took advantage of the high call rates and managed to guard their assets in this turbulent market.

Debt - Medium Term

Medium term debt instruments on an average gained close to 0.34 per cent in the last month. Alliance MIP topped, thanks to its equity exposure with a return of 1.76 per cent. PNB Debt Fund emerges the second in this category, with a return of 1.22 per cent last month.

The monthly option of Tata Income is the top loser and has lost 1.13 per cent in June. On the other hand, the growth option of Tata Income has posted a positive return.

Top gainers 1-month return (%)
Alliance MIP (G) 1.76
PNB Debt Fund 1.22
Escorts Income Plan 1.17
Tata Income (G) 0.90
LIC Bond 0.77
Dundee Bond PSU 0.75
Templeton MIP 0.68
Chola Freedom Income 0.62
JM Liquid (G) 0.61
Kothari Pioneer CAP 0.48
Category Average 0.34
Top losers 1-month return (%)
Tata Income (DM) -1.13
Sun F&C Monthly Income Plan -0.59
Magnum LIF (D) -0.07
Dundee Bond Corporate -0.05
Magnum LIF (G) -0.01

Debt - Short-term

The volatility at the shorter end of the market saw high call rates, and short-term debt funds were destined to make a killing. The fact that their average gain in the last month of 0.74 per cent is higher than the even the medium and the long-term debt funds says it all. Templeton India Liquid has emerged the topper with a gain of 0.91 per cent.

Tata Income (Regular) option is the only loser in this group with a negative 0.02 per cent return. This is primarily because it was saddled with a portfolio of longer maturity. The appreciation option of the same fund, which was fully invested in call money instruments gained 0.64 per cent.

Top gainers 1-month return (%)
Templeton India Liquid (G) 0.91
KP TMA 0.90
Sun F&C Mon Val Liquid (DailyDiv) 0.89
Alliance Cash Manager 0.86
Sun F&C Mon Val Liquid (Normal) 0.84
Category Average 0.74
Top losers 1-month return (%)
Tata Liquid (R) -0.02

Equity - Sectoral

Sectoral funds have gained 14 per cent in the last month. But that's just a part of the story. The infotech funds, alone on an average, have posted a gain of 21 per cent leaving their FMCG and pharma counterparts lower in the order. The three FMCG funds between themselves posted a mere 3 per cent gain while the pharma trio did slightly better by posting a 5 per cent gain in June. This disparity brings into sharp focus the dynamics of investing in infotech funds. When they slide, they fall like ninepins but when they re-bound the sheer gains take them to the number one slot. Again, their recent upswing can only partly replenish their lost splendor.

While all the toppers are from the infotech sector, IL&FS E-com Fund emerges the winner with a gain of 30.73 per cent. The fund's top three holdings - NIIT, SSI, and Aftek Infosys gained smartly over the last month. Not surprisingly, there are no losers in this group.

Top gainers 1-month return (%)
IL&FS eCOM Fund 30.73
Magnum IT 29.13
UTI Software 25.28
Alliance New Millenium 24.24
UTI Services Sector 24.24
Tata IT 23.77
Kothari Pioneer Infotech 23.62
DSPML Technology.com 23.41
Birla IT 21.75
Prudential ICICI Technology 20.30
Category Average 14.01
No losers  

Gilts - Medium and Long-term

This group has posted a marginal gain of .06 per cent last month and no wonder, since the markets were in turmoil at the longer end of the market. Add to it, most funds retained their average maturity and hence, have lost. JM G-sec fund is ranked first among 23 open-end gilt funds. On the other hand, Birla Gilt Plus (Long-term) is the top loser with its NAV down by 0.46 per cent in the one-month ended June 30, 2000.

Top gainers 1-month return (%)
JM G-Sec PF 0.70
JM G-Sec Regular (G) 0.64
LIC Govt. Securities Fund 0.45
Tata GSF (A) 0.39
K Gilt Serial - 2003 0.39
Category Average 0.06
Top losers 1-month return (%)
Birla Gilt Plus (Long Term) -0.46
Dundee Sovereign Trust (DQ) -0.42
UTI G-Sec -0.42
Dundee Sovereign Trust (DM) -0.19
Dundee Sovereign Trust (G) -0.14

Gilts - Short-term

This group has posted a one-month average return of 0.56 per cent. The top gainer, Zurich India Sovereign (Savings Plan) was 100 per cent into cash as on May 31 and has gained a whopping 0.96 per cent. There are no losers in the category.

Top gainers 1-month return (%)
Zurich India Sov. Gilt - Sav. 0.96
JM G-Sec Short Term 0.84
Chola Gilt (Sav) 0.69
Category Average 0.56
No losers  

Source: Value Research

Performance Review

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