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Choices to rain on the mutual investor

Nilanjan Dey

IN a market devoid of big ideas, one thing that still makes life so interesting for a mutual fund investor is his freedom to choose. And assuming that market sentiment continues to be affirmative this week as it was over the past couple of days, the inve stor should be able to choose from among the best funds in order to take advantage of discounted NAVs.

This is surely a critical time for the MF industry. Broad economic indications (such as corporate results) are quite favourable. The drought seems to be receding and the monsoon scenario is gradually turning positive. Theoretically at least, the going (r ead: consumption and demand) should be good for cement, auto and FMCG companies.

One gets the feeling that funds which had consciously reduced exposure to high-growth sectors would not do too badly in the current situation. But, what happens to those that stuck to technology/convergence till the very end? There is no answer. However, as always, one might consider picking up assets when they are available cheap.

Much of the huge asset-base that tech funds command together is on account of schemes recently launched by players such as Alliance, Kothari Pioneer, Prudential ICICI, SUN F&C and IL&FS. Many of them had pursued aggressive marketing strategies, which are being increasingly criticised for their lack of foresight.

Investors in debt would, perhaps, find it prudent to enter into funds with portfolios of medium maturity, ideal for maximising returns over a non-too-long stretch of time. Ideally, one should go in for portfolios that comprise well-rated (the highest rat ing being Triple-A) securities.

Broadly put, the developments that investors could await in the days ahead are: More convenience, thanks to technological innovations; investment and payment on the Net; consolidation among funds, resulting in an even wider gap between big and small play ers; new and professional distribution channels (especially banks); and customised products aimed at addressing individual needs. Finally, two categories -- money market and pension funds -- would emerge important, just as in more mature markets.

News for IPO watchers: HDFC MF's maiden products (equity, debt and balanced funds) are expected in July. The firm has recently secured a tie-up with its overseas partner, Standard Life, for both MF and insurance.