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Diversified equity funds cross Jan ‘08 NAV levels

As equity markets inch towards January 2008 levels, 91 equity diversified funds have already hit all-time high NAV

On Tuesday the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) indices the Sensex and Nifty crossed the 20,000 and 6,000 mark respectively, taking along the stride several stocks that touched new highs or surpassed their all-time highs. However, equity mutual funds witnessed this phenomenon a day earlier on Monday, September 20. With 91 of the 247 equity diversified funds (all launched prior to January, 2008), touching or crossing their all time high NAV, investors holding these funds have a lot to cherish about.

NAVs of 11 out of these 91 funds are 10 per cent above their January 8, 2008 levels when the Sensex hit its all-time high of 21,000. For instance NAVs of ICICI Prudential Discovery Institutional, DSP BlackRock Micro Cap, and Birla Sun Life Dividend Yield Plus have appreciated by about 13 per cent since January 8, 2008. NAVs of Birla Sun Life MNC and Quantum Long Term Equity have risen more than 12 per cent in the same period, while DSP BlackRock Top 100 Equity Institutional plan, ICICI Prudential Discovery, ING Yield and Sundaram Paribas Select Mid Cap Institutional have appreciated by over 11 per cent.

Equity funds have been witnessing massive outflows due to rising equity markets and the impact of the entry load ban imposed in August 2009. And, the rally in equity markets may lead to further redemptions in equity funds. However, Harsha Upadhyay, fund manager, UTI Mutual Fund, said, “I don’t think there would be massive redemptions because of NAVs touching new highs. Especially, when outflows have been happening for quite some time, and many investors who were stuck in the market for 2-3 years have already made profit and pulled out their money.” He further clarified that NAVs of many fund schemes crossed the January 2008 levels a long time back.

Why SIP is best?

At Value Research we keep restating the benefits of systematic investment plans (SIPs). To substantiate this fact, we compared the returns earned on lump sum and SIP investments by the top five rated funds.

Return on a lump sum investment made in HDFC Top 200 on January 8, 2008 is around 10 per cent (as on September 20, 2010), but a monthly SIP started on that date has given a return of 40 per cent. In case of IDFC Premier Equity Plan A, the return on lump sum investment is 9 per cent, but the same is 48 per cent on investment through monthly SIP.

Return on investment made in Jan 8, 2008


Scheme  SIP Return (%)  Lump sum (%)
HDFC Top 200 40.23 9.92
IDFC Premier Equity Plan A 48.30 9.04
ING Dividend Yield 47.87 11.18
Quantum Long Term Equity 43.44 12.27
Reliance Regular Savings Equity 38.64 3.51
Monthly SIP of Rs 1000 starting from 08/01/2008
SIP Return as on 20/09/2010