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Niskalp Investments & Trading Co. Ltd.

This young fund looks promising for its solid and disciplined performance. IDBI-PRINCIPAL Income has largely maintained a quality portfolio, which makes it one of the least volatile funds in its category.

In its brief history, this 5-star fund has consistently outperformed its peers. The fund's trailing 1-year return of 12.38 per cent, as on February 7, 2003, beats the category (10.73 per cent return) hands down.

True, IDBI-PRINCIPAL Income has mostly seen an upbeat bond market, the fund deserves credit for its stability. For instance, a standard deviation of 0.45 is on the lower side in the category. Taking advantage of declining interest rates, the fund turned in a handsome 17.67 per cent return in 2001. More recently, after the bank rate cut in October 2002, IDBI-PRINCIPAL Income gained 2.25 per cent against the peer's 1.8 per cent return in November 2002. Overall, the fund was up 16.73 per cent through 2002, which places it among the toppers in the medium-term debt fund category.

IDBI-PRINCIPAL Income has largely maintained a quality portfolio. Initially, in 2001, the fund benefited from a higher corporate bond stake while, in 2002, government securities helped boost the fund's return. It has largely stayed clear of lower-rated corporate bonds, which have accounted for an average 12 per cent of its portfolio. Over time, this quality orientation has helped the fund be less volatile vis-à-vis its rivals.

Though the fund was launched just before the bull-run, it maintained relatively shorter portfolio maturity in sharp contrast to its aggressive peers through 2001. However, three rate cuts in the year helped the fund deliver good returns. Following the October 2002 rate cut, IDBI-PRINCIPAL Income increased its average maturity to 6.2 years. Since then, owing to a continuous yield fall, this fund has maintained a higher gilt exposure (45 per cent). But witnessing a recent rise in bond yields, it has slightly reduced the average maturity to 6.08 years in January this year. That apart, the fund's decent performance and stability saw its asset base grow by five times (Rs 665.81 crore, as on December 31, 2002) in its over two-year stint.

This young fund has climbed the performance ladder quite diligently. Though it has mostly seen a rising market, still, its stability and discipline inspire confidence.