Search the Internet           Tips

Best and worst funds of September quarter

Equity markets

If a colourful depiction were to be given to the performance of equity funds for the quarter ended September 30, it would be a 'red-wash'. In three months where the broad markets have lost over 14 per cent, it does not come as a surprise that there is only one gainer in a basket of 92 equity funds -Tata Pure Equity the only green spot in Red Sea!

It was a volatile quarter for the equity markets - the Sensex lost more than 2 per cent on 12 days while it gained more than 2 per cent on 7 occasions. That the markets witnessed an unprecedented seesaw movement is best illustrated by the fact the sharpest fall in the indices was immediately followed by the biggest gains in the quarter. For instance, the biggest fall of 275 points (6.17%) on July 24 was immediately followed by the highest gain of 147 points (3.53%) for the period. The second biggest fall for the three months on September 22 (225 points or 5.28%) was followed by a gain of 141 points (3.5%) on September 25. Indeed, bargain hunters were waiting in their wings to gobble the battered stocks.

The month of July was, by far, the worst for equities in the current calendar. With foreign institutional investors being net sellers to the tune of a whopping Rs 14 billion, the markets lost nearly 10 per cent. August, however, saw the emergence of FII buying and mutual funds descended on the equity markets for cherry picking. The duo pumped in a net of nearly Rs 14 billion in equities. The equity markets consolidated gains in early September, with the Sensex gaining nearly 300 points in eight trading sessions. However, the oil slick and profit warnings by global IT majors wiped off a staggering 15.35 per cent or 731 points in only eight trading sessions, including the 225 points crash on September 22. Nonetheless, both FIIs and funds invested a net of Rs 2.73 billion during the month.

Diversified equity funds

The silver lining amidst current turbulence is that diversified equity funds have lost less than the market indices. The average fall is 12.29 per cent against a 14.65 per cent drop in both Sensex and Nifty Total Return indices. This, in sharp contrast to the previous quarter, where diversified funds had lost a whopping 17.08 per cent against a 5.05 per cent fall in the Sensex. The funds have outperformed despite a near status quo in technology exposure, which was around 40 per cent, both on June 30 and on August 31. The reason - the current quarter has seen a broader decline in stock prices, unlike the previous quarter, where only technology stocks were hammered. Some amount of buying in quality technology stocks in this quarter has also helped funds cut losses.

Tata Pure Equity is the only gainer among 61 diversified equity funds, with a marginal return of 0.45 per cent. The fund has a well spread portfolio though it had around 53 per cent of its assets in IT stocks on August 31. The fund seems to have benefited from a high cash position of around 25 per cent, which has helped it cushion the fall in net asset value (NAV). On the other hand, the top loser in the current quarter is IL&FS Growth &Value. The loss of nearly 21 per cent is largely attributed to an average decline of 25 per cent in its three investments of second-rung technology stocks. Add to it, the fund's top holding, NIIT has lost a whopping 35.5 per cent in the quarter.

Top gainers	3-month return (%)
Tata Pure Equity	0.45
Category Average (61 funds)	-12.29

Top losers	3-month return (%)
IL&FS Growth & Value	-20.87
Tata Tax Saving	-19.94
GIC Growth Plus II	-19.82
Birla Equity Plan	-18.82
UTI Master Growth	-18.81
Sun F&C Value	-17.25
DSPML Equity	-17.19
Birla Advantage	-17.07
JM Equity-G	-16.91
Magnum Global	-16.38

Sectoral - IT/Technology

Although there are no gainers for the quarter in technology funds, this segment of sectoral funds has been able to limit losses with an average fall of 16.32 per cent against a 25.17 per cent decline in the quarter ended June 30, 2000. The basket of 13 technology funds has also beaten the i-SEC Software Index, which has lost 19.47 per cent during the same period. The limited loss is attributed to the strong buying in technology stocks in August, when these funds gained an average 12.44 per cent. The top loser in the pack is IL&FS eCOM Fund, which has declined 23.9 per cent during the quarter. Three of the fund's top holdings - NIIT, Aftek and VisualSoft have seen an average fall of 34.5 per cent.

No gainers
Category Average (13 funds)	-16.32%

Top losers	3-month return (%)
IL&FS eCOM	-23.90
Birla IT	-23.09
Tata IT	-21.07
DSPML Technology.com	-18.14
UTI Software	-17.83

Sectoral - FMCG

No positive surprises here either as the three FMCG funds have lost an average 6.1 per cent against a 3.94 per cent fall in i-SEC FMCG Index during the quarter. Kothari Pioneer FMCG Fund has lost the least with a 4.88 per cent drop in NAV and is the only fund with its NAV above par.

No gainers
Category Average (3 funds)	-6.10%

Top losers	3-month return (%)
Prudential ICICI FMCG	-7.07
Magnum FMCG	-6.34
Kothari Pioneer FMCG	-4.88

Sectoral - Pharma

The three pharma funds are languishing below par at the end of the quarter while they were trading above par for the three months ended June 30, 2000. The "pill" funds have lost an average 6.32 per cent during the quarter ended September 30. UTI Pharma Fund is at the bottom of the pack with an 8.11 per cent drop in NAV.

No gainers
Category Average (3 funds)	-6.32%

Top losers	3-month return (%)
UTI Pharma & Healthcare	-8.11
Magnum Pharma	-5.66
Kothari Pioneer Pharma	-5.20

Equity - Speciality

The Value Research Speciality Funds represents those funds, which cannot be classified into any particular sector or category. These funds invest in an amalgam of sectors and hence are not strictly comparable. This non-homogeneous category of 12 funds has no gainers and has posted an average negative return of 11.53 per cent. The top loser is UTI Services Sector, with a decline of 19.75 per cent. The fund has a tech-heavy portfolio with 72 per cent exposure to technology stocks. Other above average losers are also overweight on technology.

No gainers
Category Average (12 funds)	-11.53%

Top losers	3-month return (%)
UTI Services Sector	-19.75
Tata Life Sciences & Technology	-17.07
DSPML Opportunities	-15.24
UTI Brand Value	-14.32
Unit Growth Scheme 10000	-14.16

Balanced funds

With volatility in debt markets and losses in equities, the Value Research category of 27 balanced funds has lost an average 7.04 per cent but has marginally outperformed the Value Research Balanced Index, which fell by 7.94 per cent. However, the category has two surprise gainers in Canbank's Canpremium and UTI's Grihalaxmi Unit Plan. Unlike other balanced funds, Canpremium has a predominant debt exposure, which was at 69 per cent in August 2000. With 26 per cent of the debt portfolio in cash, the fund has benefited from the high repo and call rates in August and September. On the other hand, the top loser is Magnum Balanced from SBI Mutual Fund, with a fall of 13.81 per cent.

Top gainers	3-month return (%)
Canpremium (Roll Over)	3.57
Grihalaxmi Unit Plan '94	0.01
Category Average (27 funds)	-7.04

Top losers	3-month return (%)
Magnum Balanced	-13.81
Sun F&C Balanced	-11.39
GIC Balanced	-10.87
Dundee Balanced	-10.16
DSPML Balanced	-10.09

Debt markets

The placid debt markets were on fire this quarter. The government's large borrowing programme and a skidding rupee finally culminated in Reserve Bank of India hiking interest rates on July 21 to defend the currency. This lead to a bloodbath in the debt markets and in a rare occurrence, bond funds lost an average 0.25 per cent in July. The losses were sharper in debt funds, with a high exposure to government securities.

In the last two months, the rupee has played Pied Piper to the debt markets, with the RBI sucking out liquidity through repos to check speculation in the forex markets. With repo and call rates in double digits for most part of August and early September, it has helped cash funds and debt funds, with a high cash component to post decent returns. In fact, short-term debt funds have comprehensively beaten bond funds in the last quarter.

Debt with marginal equity

With a substantial chunk of investments in debt, this category has posted an average return of 0.15 per cent with the top gainer, Kothari Pioneer Children Asset Plan notching a gain of 2.06 per cent. On the other hand, the top loser is the monthly income plan from Sun F&C, which has lost 1.58 per cent. In fact, the losses have forced the fund to skip monthly dividends for August and September.

Top gainers	3-month return (%)
Kothari Pioneer CAP	2.06
Templeton MIP	0.97
Tata Income-G	0.63
Category Average (6 funds)	0.15

Top losers	3-month return (%)
Sun F&C MIP	-1.58
Kothari Pioneer Pension Plan	-1.18

Debt-Medium term

Despite the setback in July, when fund managers were caught off guard, the basket of 33 debt funds has posted an average gain of 0.94 per cent. However, the gains are dwarfed when compared to the whopping average return of 2.63 per cent between April and June. The top gainer in the quarter is Escorts Income Plan, with a return of 1.8 per cent. The fund seems to have benefited from a high exposure to AA and below rated papers, whose high interest income has helped the fund offset capital losses due to a hike in interest rates. On the other hand, Dundee Bond PSU has returned 1.78 per cent due to deft portfolio management. With 72 per cent of its assets in money markets in July, it emerged unscathed in the mayhem after RBI upped interest rates. The top loser is the quarterly dividend option from Tata Income whose NAV has fallen by 1.24 per cent.

Top gainers	3-month return (%)
IDBI Principal Deposit - C	6.90
Escorts Income Plan	1.80
Dundee Bond PSU	1.78
LIC Bond	1.64
JM Liquid Fund-G	1.45
Sun F&C Money Value Bond	1.32
Reliance Income	1.25
UTI Bond	1.24
ING Income Portfolio	1.14
Templeton India Income	1.04
Category Average (33 funds)	0.94

Top losers	3-month return (%)
Tata Income-DQ	-1.24
Dundee Bond Corporate	-0.59
IDBI Principal Deposit - B	-0.46

Short-term debt funds

Cash funds have beaten bonds funds hollow in the current quarter and it's a relief to see that there are no losers here. With very short-term investments, these funds survived the interest rate hike (average gain 0.59%) in July while the subsequent high call and repo rates has helped them post an impressive return. Templeton India Liquid Fund is the top gainer, with a return of 2.58 per cent higher than the sector average for 20 funds at 2.17 per cent.

Top gainers	3-month return (%)
Templeton India Liquid	2.58
Zurich India Liquidity Investment	2.54
Alliance Cash Manager-Growth	2.51
Prudential ICICI Liquid Plan	2.50
Birla Cash Plus	2.49
Category Average (20 funds)	2.17

No losers

Long and medium term gilt funds

This bundle of government security funds has gained an average 0.55 per cent during the quarter, way below the splendid return of 2.29 per cent in the previous quarter, when interest rates were cut in April. But that is how gilt funds behave, since gilts are most susceptible to interest rate changes. That gilt funds are in positive territory despite losing 0.76 per cent in July illustrates that sentiment has improved in the debt market. However, most top gainers during the quarter are those gilt funds with a shorter maturity profile. Short-term securities are less impacted than long-term bonds, when interest rates change. The top gainer is the PF Plan of JM G-Sec Fund with a return of 1.8 per cent. Apart from a 39 per cent cash component in August, the fund is largely invested in short-dated gilts. On the other hand, the top loser is the yearly dividend option of Dundee Sovereign Trust, which has lost 1.88 per cent. Despite gains in the last two months, the fund is yet to recover fully from a 3.03 per cent fall in NAV in July.

Top gainers	3-month return (%)
JM G-Sec PF Plan	1.80
JM G-Sec Regular Plan	1.66
K Gilt Serial 2003	1.62
Birla Gilt Plus Long-term Plan	1.36
LIC GSF	1.16
Category Average (25 funds)	0.55

Top losers	3-month return (%)
Dundee Sovereign Trust-DY	-1.88
Dundee Sovereign Trust-DH	-0.33
Dundee Sovereign Trust-DM	-0.07

Short-term gilt funds

There are no losers here as well with the category posting an average return of 1.6 per cent. These funds have also made a killing by investing in repos. Chola Gilt (Savings), which has maintained a large cash position in the last couple of months, has topped the charts with a return of 2.61 per cent.

Top gainers	3-month return (%)
Chola Gilt Savings	2.61
Zurich India Sovereign Gilt Saving	2.18
K Gilt '98 Saving Plan	2.14
Category Average (8 funds)	1.60

No losers

Money

Performance Review

Tell us what you think of this review