MFs in 2000: Diversified funds do well

Suresh Krishnamurthy

WITH equities plummeting for the most part of the year, equity funds turned out a forgettable performance.

The list of top performers wears a changed look with predominantly diversified funds making it to the top.

Funds that were overweight on the technology sector performed relatively poorly. In the case of dividend options, if the investor had not reinvested the dividends the declared returns would have generally been better than the growth options.

Evidently, 2000 was a year in which pulling funds out of the market after February and continuing to remain on the sidelines till the end of October would have paid off.

Interestingly, some close-end funds, such as Jardine Fleming Tax Saver and JM Tax Cover 1998 Dividend Plan, also made it to the top of the charts. Among open-ended schemes, the strong performers were Kothari Pioneer Bluechip, Templeton India Growth, Sundaram Growth Fund, Alliance Equity and Kothari Pioneer Taxshield.

Notably, most of the schemes outperformed the Sensex and other broader indices, while quite a handful underperformed the S&P CNX Nifty. However, the number of schemes that would have outperformed the narrower indices since March this year were only a handful.

At the bottom of the pile are Prudential ICICI Tax Plan, SBI Magnum Multiplier Plus 1993, JM Tax Cover 1997, ING Growth and Kothari Pioneer Prima. Barring Prima, most of the funds that lost value heavily in 2000 were those that had invested heavily in the highly volatile stocks in the technology and the media sector.

Some of the schemes have done as poorly or even worse than technology sector funds. This is perhaps a reflection of their aggressive stock selection policies as well as concentrated nature of their portfolios. In the case of Prima, the exposure to small-cap stocks has proved to be the undoing in a bear market.

Sectoral funds: In the case of sectoral funds too, a surprise awaits the investor, with the UTI's Petro Sector and Services Sector Funds with JM Basic Fund at the top of the pile. The sharp run up in the price of petroleum sector stocks in the last quarter of the year in addition to the concentrated nature of the portfolios have come in handy.

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Among other sectoral funds, FMCG Funds led by Kothari Pioneer FMCG Fund have generally done well. This is in line with the better performance of stocks of consumer goods companies especially since March this year. Investors who did not reinvest dividends in the case of Chola Freedom Technology and Kothari Pioneer Infotech Fund would also have generated decent returns on a relative scale. However, IT sector funds are generally at the bottom of the pile, even below pharma funds.

Income Funds: There are no surprises, however, in income funds. Most mid-sized funds, such as Dundee Public Sector Bond, Kotak K-Bond, Sundaram Bond Saver and Escorts Income Plan, head the pack. However, large funds, such as those of Templeton India Income Fund, Birla Income Plus and DSP Merrill Lynch Bond Fund, have not fared too badly in comparison to the mid-sized funds.

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Importantly, DSP Merrill Lynch Bond Fund and Templeton India Income Fund are quite active in managing their funds. Tata Income Fund's appreciation option, Dundee Corporate Bond Fund, ING Income Portfolio, ILFS Bond Fund and Jardine Fleming India Bond Fund have fared poorly in comparison.

Balanced funds: Most balanced Fund also lost value during 2000, because of their exposure to the stock market during the year. Alliance 95, which maintained a higher weightage to equities in particular, lost around 10 per cent, while Zurich Prudence, which has a more mellowed approach to equity allocation, also lost a similar percentage.

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Kothari Pioneer Pension Plan, an income fund that changed course mid-way during the year to become a balanced fund with a maximum exposure of 40 per cent to equities, is the top performer. Funds that fared poorly on a relative basis are Prudential ICICI Balanced Fund, Canganga, DSP Merrill Lynch Balanced Fund, Dhanasahayog and Cantriple.