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Half-yearly Progress and Decline Report

Since Jan'01, the debt funds are up by a cool 11.37% but equity funds seem to be destined to fall, with a 20% loss. We present the checklist of gainers and losers………………

Six months of the year 2001, the mutual fund investor's experience is on two extremes -- of pleasure and pain. On one hand, the Debt funds which invest in Medium & Long-term gilt gained 11.37 percent in the past six months, followed by the open-end Bond funds gaining 8.39%, riding the sustained bond rally driven by successive rate cuts. On the other hand, the pain of the Technology Fund investors has only grown with 37% erosion in value in six months while the average diversified equity fund is down 20 percent. Even the balanced funds lost 11% during the year to date.

The Bond performance highlight was the Kotak Mahindra's K Gilt Serial Plan 2013 gaining 14.10%, followed by Templeton India Sovereign Gilt Fund up 13.85%, Birla Gilt Plus-Long-term up 13.77%. The leading bond funds also zoomed --PNB Debt up 10.80%, K Bond Wholesale up 9.99%, Grindlays Super Saver up 9.85% and Kothari Pioneer Income Builder gaining 9.75%. However, such stellar returns in past six months is clearly not sustainable. As the bond fund owe their return to rising bond prices with successive interest rate cut. And the lowering of rate will eventually bring down the fund yields. So these funds remain attractive for what they basically offer -- superior returns than most fixed income options with higher liquidity. So consider these funds ignoring the recent past, as it is entirely a special situation than a trend.

The equity funds continued their downhill journey and the best performing fund was -- Templeton India Growth Fund which was down only 4.33% and Magnum Contra down 5%. And the ones to lose most were --ING Growth Portfolio (-67%), Libra Leap (-55%),Dhansamriddhi (-55%),Magnum Multiplier Plus (-54%) and Birla Advantage (-50%). A clear and somewhat obvious trend emerges from the sample of big losers and not so big losers. All the big losers are highly adventurous in managing their portfolio. The ING Growth Portfolio owes its loss to its excessive technology exposure in which the technology stocks account for 81% of the portfolio even today. Incidentally, the fall of ING Growth is even steeper than worst technology fund. Similar is the case of all others funds. On the other hand, diversification of a fund's portfolio is getting fashionable again. Unfortunately, the USP and the key benefit of a fund is Diversification. This oftenly forgotten rule in a market frenzy has proved so costly in the tech wreck, that hopefully fund managers retain their belief and follow this basic rule.

As for your action plan if you are invested -- stay invested with the well diversified one's and get out of the indisciplined funds. And for your fresh investment in equities, it is always the best place for your long-term saving -- only if you invest regularly and for a long period.

Fund Update
For the week ending June 29, 2001, the markets gained 75 points (2.22%) on the Sensex and 10 points (0.61%) on BSE National Index. The top gainers were IL&FS eCOM (3.89%),Magnum Taxgain (3.8%) and Canequity-Tax Saver (3.45%). And the biggest losers were Taurus Starshare (-2.47%), Kothari Pioneer Prima(-1.63%) and Dhansamriddhi(-0.99%).