Already weighed down by gilts, the markets again went for a tailspin this week thanks to the deadly terrorist raid in Jammu. With the Indian government holding Pakistan responsible for such ghastly acts, and the possibility of the two countries going to war made the markets jittery. The result: markets bled through most part of the week. Among the many casualties were mutual funds. It did not spare anyone be it equity or debt -- just about everything dipped. Since equities are more volatile in nature, obviously they lost more. While on an average an equity-diversified fund lost 2.69%, the loss was a low 0.56% for an average bond fund. However, the biggest losers were gilt funds: the category slipped by almost 1.61%. The gilt market saw prices skid on Friday evening after hearing the news of a blast in Srinagar. Prior to that, the prices had inched up marginally but the blast news saw the prices go down again. Ultra short-term bond funds, however, were lone survivors, posting a return of 0.13% over the week.
Incidentally, the week had started on a promising note with Bajaj Auto declaring better-than-expected results. The two-wheeler major reported a 98% rise in net profits for the year ended March 31, 2002. That apart, the cement scrips rose on the back of an increased demand, but fell subsequently. About 16 of the 52 equity-diversified funds are invested in Bajaj Auto, 24 in cement major ACC, 20 in L&T and 13 in Gujarat Ambuja. But all this news which would have normally revitalised the market, failed to do so due to border tensions, which saw profit bookings by investors.
While negative sentiments were the order of the week, Pioneer ITI brought some cheer to investors. In addition to the existing growth and dividend options, the fund introduced a bonus plan for all its debt schemes: Income Builder Account (IBA), Monthly Income Plan (MIP), Gilt Fund, Short-term Income Plan and Treasury Management Account (TMA). The AMC has positioned the bonus option as a grand incentive for investors with less than 1-year investment horizon. Investors can use the bonus plan to ease the tax burden on account of the new dividend tax measures introduced in the Budget this year. And not just that, capital gains elsewhere can be offset by the capital losses incurred under the investment alternative in question. Another fund, Sun F&C Mutual, also launched the third series of its yearly Fixed Maturity scheme.
Hopefully, bearish sentiments won't rub off on the markets next week. With IPCL's divestment expected to be settled this weekend, the markets will have something to raise a toast to. The IPCL divestment is likely to send PSU stocks soaring. Funds having major stakes in PSU stocks will obviously be the biggest beneficiaries. But some industry sceptics are of the view that Monday could still open on a weak note due to the prevailing situation in the country.
Fund Update: During the week, the Sensex lost 98 points while the broad-based BSE National Index lost 39 points. The key gainers during the week were UTI Petro (0.22%), Sun F&C Resurgent India Equity (-0.09%), Dhansamriddhi (-0.51%) and Escorts Growth Fund (-0.71%). The major losers were IL&FS eCOM Fund (-6.12%), Magnum Taxgain (-6.03%), Pru ICICI Technology (-5.87%) and Birla IT (-5.67%).
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