Nilanjan Dey

WITH the equity market coming down substantially from its peak level, this is time for investors to turn a little more realistic. This is also the time to start preparing for further volatility.

Stock prices have indeed gone through considerable ups and downs in the last few sessions, prompting many investors to move away from the market for the time being. At any rate, not everybody is seeking to make fresh allocations at this moment. The strategy instead is to wait for things to settle down a bit before active calls are taken. A large section is of the view that a firm direction may not set in immediately.

As of today, investors in equity funds would render themselves a good service if each of them starts a regular investment exercise. Such a programme, especially one that is meant to continue for at least a few years, would bring in a sense of discipline, irrespective of market conditions.

As for the fund houses, the quest for assets continues. This is reflected in their efforts to launch new equity products. Some of these even have fancy names, including ones that differentiate them from normal, diversified, growth-oriented schemes.

The last couple of months have already seen the introduction of a few such schemes; a few more are expected to be offered in the coming days. Among these will be funds conceived by HDFC MF, Kotak Mahindra MF and SBI MF.

Intermediaries such as Cholamandalam Distribution have their own way of explaining things. This year, it is felt, one would see the initiation of three varieties of funds. The first is where fund managers sell their own capabilities, as in Principal Focused Themes, which will invest in any six sectors at all points in time.

The second is marked by the extension of existing opportunities; an example of this is Sundaram MF's SMILE, which is dedicated to small and medium sized companies. The third, Chola has added, "would be more in number and be based on the risks of the underlying asset class". The dominant theme in 2004, for instance, was mid-cap.

This year, it is expected, there may well be a few new categories. Commodity funds and capital guaranteed products could add to the choice that is already available. Some quarters expect commodity-linked funds to begin with investment in gold.

However, real estate funds, despite the great property boom in India and all the hype associated with land prices, may not happen immediately because many pending issues would have to be addressed.

Those who are attuned to the fixed-income market may have the chance to check out funds that focus on the international debt scenario. Higher-rated sovereign, quasi-government and corporate debt paper may offer relatively lower default risk, it is felt. Birla Sun Life MF and Deutsche MF have already shown interest.

Lastly, let's hear what another MF distributor has to say about financial planning. Here goes: "You wouldn't travel to Europe without an itinerary; you wouldn't build your dream house without a blueprint. You wouldn't even hold a dinner party without first making sure of arrangement and menu. So why would you manage your financial affairs without a plan?" And that, one thinks, is a telling observation.

Feedback may be sent to nilanjan@thehindu.co.in

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