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Playing it safe in weak moments

Nilanjan Dey

THE end of the year presents an opportunity for mutual fund investors to take stock of what they did in 2000. It is also time to consider the performance of their favourite funds on a year-on-year basis.

How did the top-ranking funds perform in 2000? How does their performance compare with that in the previous year? And perhaps, more importantly (especially to the not-so-patient investors), did they do the right thing by staying invested for 12 whole mon ths? These are some of the questions that must be answered before further decisions are taken.

Let's narrow our focus down to the next seven or 10 days. Equity funds, which have suffered from weakened sentiments on the stock markets, would be expected to play along cautiously, waiting for next upturn.

There is no saying, however, as to when they would be able to see the next round of profit-booking. Till such time, fund managers would be expected to buy selectively on the basis of low valuations.

Talking of valuations, there may be a lesson for MFs in the recent mergers and acquisitions, restructuring and open offers. As investors, are they really benefiting from the so-called ``unlocking'' of values? That question could, perhaps, set the tone fo r a detailed debate in the days to come.

The latest slide in equities could prompt some investors to enter index funds. There are not too many of these to choose from in the country; the existing ones are from the likes of UTI, Franklin-Templeton and IDBI Principal. Investors in these would ben efit when the stock markets turn better next (as reflected in rise in the indices such as Sensex and Nifty).

One can safely expect, in one form or other, some restructuring of public-sector bank/FI-promoted MFs such as Canbank MF, Indbank MF and GIC MF. That should be good news to investors in both plain-vanilla and oddball schemes promoted by these funds. Amon g the latter kind is GIC D'Mat, a rather unusual scheme aimed at holders of dematerialised securities; its NAV is currently less than Rs 8.

Escorts MF has moved SEBI to convert a close-ended income scheme into an open-ended product with a number of plans for investment in debt securities.

Kothari Pioneer MIP has declared its maiden dividend of 0.9 per cent in the monthly option. Bond prices, fund manager Mr Suresh Soni has informed, have improved in recent times on account of increased liquidity in the system. The scheme, which has invest ed in fixed income and money market instruments, is waiting for the stock market to stabilise before it invests in equities.

A number of income funds have already come out with serial plans, and a few more expected to join the league. It is to be seen how the market reacts to these term-bound options.

Meanwhile, as transaction trends for the month (up to December 21) show, gross purchases of equity funds trailed gross sales by Rs 95.39 crore. Gross purchases of debt funds, however, were more than gross sales by Rs 235.28 crores.

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