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Bond Funds: Up Again

The biggest gainers this week were gilt funds. The category posted a return of 1.21% this week. However, with war fears looming large over the stock market, the equity funds dipped.

The stock markets were slaughtered for almost the entire week. The reason: possibility of an Indo-Pak war. However, Prime Minister Atal Bihari Vajpayee's statement of 'no war clouds' lifted the market sentiment. Overall, the Sensex lost about 2.34%. Since the Sensex took a beating, equity funds were hit too. On an average, equity diversified funds lost 1.71%. Bond funds after languishing for a while turned in a better performance. While they lost 0.56% last week, they were up 0.38% this week. However, the biggest gainers this week were gilt funds: the category posted a return of 1.24%. While gilt prices were down until Wednesday, they headed northwards following the Prime Minister's statement of no war.

The IPCL disinvestment went completely unnoticed. In the absence of border tensions the PSU divestment would have seen the market take wing, as it is the biggest government selloff by far. After all, it fetched the government a whopping Rs 1,491 crore. With some of Reliance plants' close proximity to the borders and the possibility of a strike in the event of the Indo-Pak war, Reliance Industries and Reliance Petro scrips went southwards. HPCL and IPCL took a hit too. Currently, about 37 of the 52 equity-diversified funds are invested in RIL, 46 in HPCL and 10 in IPCL. Due to the general gloom even cigarette major, ITC's good results (net profits in 2001-02: 18%), couldn't excite the fund industry. As many as 45 equity diversified funds have exposure to in this company. However, with border tensions easing off, hopefully, the market will have something to cheer about next week.

Bad news apart, some launches too happened this week. Of the 34 AMCs in the country, 2 made headlines this week -- Kotak Mahindra Mutual and Zurich India Mutual. Kotak Mahindra Mutual added a new fund to its debt family by launching a 370-day Fixed Maturity Plan (FMP). The plan offers 3 options -- Growth, Dividend Payout and Dividend Reinvestment. On the other hand, Zurich India Mutual also launched the fifth yearly series of FMP called Zurich India High Interest Fund - Fixed Maturity Zuriplan, Yearly Option V. That apart, this fund introduced some changes in its schemes. An entry load of 2% was introduced in the SIP (Systematic Investment Plan) of all its equity and balanced schemes, such as Equity Fund, Top 200 Fund, Capital Builder Fund, Taxsaver and Prudence Fund.

Fund Update: During the week, the Sensex lost 78 points while the broadbased BSE National Index lost about 25 points. The key gainers were Reliance Vision (2.26%), Libra Taxshield'96 (1.38%), Taurus Discovery Stock (0.57%) and Dhansamriddhi (0.44%). The major losers were JM Equity – D (-3.35%), Tata Pure Equity (-3.22%), Escorts Tax Plan (-3.11%) and Pru-ICICI Tax Plan (-2.92%).