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Fortune favours the brave?

Nilanjan Dey

``WHEN the going gets tough, the tough get going.'' All investors, including even the poster-boys in the world of mutual funds, are towing that line, given the recent developments in the capital market.

Indeed, most funds are anticipating upheavals in the equity market over the short-term, following announcements of structural changes by the securities regulator. However, the more conservative among them are viewing such announcements as steps that woul d render it safer and more reasonable.

The general opinion is that economic fundamentals are okay even as valuations look good on the stock market. Given these premises, fund managers are advising investors to concentrate on quality. Above all, they are being cautioned not to play the perilou s game of timing the market. MFs are also touting the merit of SIPs (systematic investment plan) at this point.

FMCG funds are waiting for their sector to recover in the post-monsoon period while pharma funds expect positive developments such as breakthroughs in exports for drug manufacturing companies.

Some sections are of the view that investors could do well to pick up index funds, and stay invested in them for some time -- at least till the equity market stabilises and turns around sufficiently. Index-investing has its points, being a pass ive and relatively low-cost option.

On the fixed-income side, MFs are nervously watching RBI's every move for pointers on interest rate movements. Almost without exception, they subscribe to the view that the rates could soften in course of time. Only the very brave is ruling out volatilit y in the short-term.

Yet, the liquidity level in the system is not in question. And, the market is aware of the thinning spreads of non-Government debt over Government debt. Also, it is expected that there would not be too many negative developments in the bond scenario.

Amid all this, a number of funds have been revising their portfolio maturity for select time periods to gain from the downward motion in the yield curve.

For distributors, debt is still reigning supreme. The market, for some time now, has been witnessing serious efforts by intermediaries to tap debt fund investors.

It may be mentioned in this context that trusts, charities and non-profit organisations have lately come up as big investors. Their investment decisions are driven by the possibility of earning steady returns and need to preserve capital.

Meanwhile, MFs' efforts at declaring dividends continue. Recently, Kothari Pioneer and Dundee MF announced dividends; three of the latter's schemes have made monthly payouts.

The average investor could make use of some of the educational tools that have been developed by MFs. These include investment calculators and needs analysers. A number of online classrooms have come up as well.

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