These funds may be helpful in predicting future market movements

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Balanced advantage funds: Helpful to predict market movements

Balanced advantage funds (BAFs) have often been promoted by marketers as mutual funds that can expertly navigate market fluctuations. That's because these funds tactically calibrate their equity-debt allocation as per market conditions.

For instance, if they expect the market to weaken, these funds lower their equity exposure. On the other hand, if these funds sense the markets to grow in strength, they up their equity allocation. Because these funds often change their equity-debt allocation by taking an educated guess about market movements, we wanted to see if they are turning cautious, especially because the financial markets have touched new highs in recent weeks.

Maintaining status quo

Majority of them are neither fearful or greedy

Equity allocation No. of balanced advantage funds
Increased by more than 5 per cent 2
Within 5 per cent either side 24
Decreased by more than 5 per cent 1
Note: Balanced advantage funds in existence at the start of 2023 have been considered. Change in equity allocation in the last three months of 2023 vis-a-vis the whole of 2023 has been considered.

Looking at the table, you can see most BAFs have not really tinkered too much with their equity-debt allocation in the last three months.

In fact, Bandhan Balanced Advantage Fund is the only fund to have turned cautious. It lowered its equity allocation from 50 to 41 per cent in the last three months of 2023. At the other end of the spectrum are HSBC Balanced Advantage Fund and Union Balanced Advantage Fund s. They have turned aggressive with their equity allocation in the last three months of 2023, suggesting a favourable market runway.

But on the whole, 24 of the 27 BAFs remain unchanged, meaning they are not expecting too many changes in the market, at least in the near future.

Our take

Absolutely no-one can predict future market movements, at least over the short-term. But if you are an investor sweating over the equity markets' next move, BAFs can be a handy guide.
As of now, though, most funds are yet to show any signs of moving away from equity to the safer havens of debt.

Also read: Nine most dependable mutual funds of the last 10 years

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