VR Logo

Showing Promise

If the performance of the past two years continues this fund could turn out to be an attractive balanced holding

FT India Balanced Fund has just completed three years. After a poor start, the fund's performance picked up in subsequent years. A diversified portfolio in equities and regular re-allocation between equity and debt has helped it turn around and generate category-beating returns. Launched at a time when the IT rally was in its last stages, the fund committed a third of its portfolio to IT stocks. This was by far the fund's largest exposure to a single sector. Towards the middle of 2000, the fund—after taking exposure to few sectors initially—diversified its portfolio. IT allocation, however, continued to be high and was brought down only in October. But the damage had been done. And by end-2000, the fund had lost as much as the BSE Sensex.

In 2001, even as stock markets continued to fall, FT India Balanced managed to prevent a steep slide in its NAV. During this period, the fund did three things right. First, it generated a 18 per cent return when the market rallied in the run up to the Budget. These category beating returns were possible largely on account of its PSU picks such as VSNL (now a Tata group company), which rose by 70 per cent. When the market fell post-Budget the fund was able to guard its returns due to its lower IT allocation and quality holdings within the sector. After 9/11, when the market recovered, FT India Balanced matched the equity market on the way up. As a result, the fund ended the year down just 4.64 per cent.

In 2002, FT India Balanced was the fourth-best performing fund in its category. Over a fifth of its portfolio invested in PSUs helped the fund post an 18 per cent gain. Within PSUs, FT India Balanced courted banks and other disinvestment plays, apart from oil stocks. This strategy helped it steady the NAV when PSU oil stocks turned volatile.

On the fixed income side, the fund has preferred corporate bonds to gilts. With an average gilt exposure of around 5 per cent the average portfolio maturity has remained on the lower side. This overly cautious management is reflected in its portfolio maturity of 1.48 years in January 2003. FT India Balanced fund's deft equity management has more than compensated for its lacklustre approach towards bonds. This fund is fast turning out to be an attractive offering.