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Two Ends Of The Pole

Surprisingly, four index funds have lost almost 50 per cent of their assets in the past six months

In the recent market turmoil and ever rising inflation we find that retail investors are bucking the trend and are quietly going about their regular chore of investment. Contrary to the popular belief that people are pulling out money from the funds, the numbers speak a different story. Investments in the range of Rs 20,000 crore have happened in the last six months, even though the market did everything possible to dissuade the investors by falling over 30 per cent and giving all sort of the negative signals, signalling an economic downturn.

The beneficiaries of this prudent investor behaviour have been mostly the actively managed funds that have done a better job in the bull run than others. Funds such as DSPML T.I.G.E.R., ICICI Prudential Infrastructure, Magnum Taxgain, Reliance Diversified Power Sector and Reliance Growth have become very popular among the investors. All of them attracted investments of around Rs 1,000 crore each. Of all the funds that have attracted major investments, the top 10 funds have attracted more than Rs 9,000 crore.

Other than Magnum Taxgain, which is a good fund that has proved its mettle over a long period of time, the rest are aggressive offerings which have benefited hugely in the bull run by either investing in mid- and small-cap stocks or by investing in growing sectors such as infrastructure or financial services. This indicates that investors are looking at past performance rather than opting for protection of their capital. If they were looking at the latter, they would have chosen well diversified, large-cap portfolios that offer decent returns with low risk.

The infrastructure theme seems to be the flavour of the season as four of the top 10 favourites are infrastructure funds, one being a banking fund. But given the changed macro-economic situation and market sentiment, these choices could prove disappointing as these companies will be most vulnerable in a rising interest rate scenario.

On the other end of the spectrum are the funds which have witnessed a fair amount of redemptions, namely mid- and small-cap funds and index funds. Surprisingly, four index funds have lost almost 50 per cent of their assets in past six months. In the line of fire are some of the decent funds like UTI Index Select Equity and Birla Sun Life International Equity Plan A. Money flowing out of index funds tend to imply that investors do not believe the end is in sight and are probably expecting the indices to move down even further.

Funds with Highest Inflow (Rs)
Fund  (Jan- June 2008)   Dec-07
DSPML T.I.G.E.R. Reg 1346.70 4759.82
ICICI Prudential Infrastructure 1292.02 4783.63
Magnum Taxgain 1244.95 3782.50
Reliance Diversified Power Sector Retail 1236.64 5956.74
Reliance Growth 889.27 6411.49
Kotak Opportunities 750.70 451.12
ICICI Pru Indo Asia Equity Fund Retail 736.62 943.48
Reliance Vision 655.54 4702.93
Tata Infrastructure 579.18 2910.80
Reliance Banking 506.09 575.63

Funds with Highest Outflow (Rs)
Fund  (Jan- June 2008)   Dec-07
Banking BeES -2921.98 5468.18
Reliance Equity Advantage Fund Retail -292.30 3084.04
ICICI Prudential Power -275.86 1662.00
UTI Index Select Equity -258.93 920.31
ICICI Prudential Dynamic -255.16 2453.08
Fidelity International Opportunities -224.65 1573.18
Reliance Equity -213.08 3683.88
Fidelity India Special Situations -202.31 2349.52
Principal Global Opportunities -178.07 563.09
PSU Bank BeES -174.29 437.98