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Equity funds hit fresh lows

Red is the colour for equity funds this holi! The budget revelry just lasted a day and since February 28, the over 700-point carnage has dragged equity funds to their nadir with an average loss of 16 per cent

Red is the colour for equity funds this holi! The over 700-point carnage has dragged equity funds to their nadir but investors shudder to think if more is in store. Fund houses have been receiving calls from harried investors but with NAVs plunging to abysmal levels, they are hardly pressing the redemption button. Since Budget, funds have sold equities worth only Rs 37 crore.

The budget revelry just lasted a day and since February 28, equity funds have lost an average 16 per cent (excluding Tuesday). As many as 57 funds from the equity universe of 100 funds are now below par with 9 funds losing more than 50% of their assets. While the mayhem has impacted every single fund, tech-heavy funds have been simply devastated. 1999's shining stars are now biting the dust with an average loss of 29%. For instance, IL&FS e-COM has seen its NAV plummet to Rs 3.31, a 67% loss from its par offer last year.

ING Growth Portfolio is the worst hit since budget with a loss of 35% and has now gone below par. A technology fund in the garb of a diversified scheme, the fund had nearly 80% of its assets in technology stocks in January 2001. On the other hand, the top performers in the carnage are the two petrochemical funds, JM Basic and UTI Petro. Ironically, it's a concentrated exposure to Reliance, which has saved the day for both funds. The Reliance scrip has lost only 2.17% since budget.

The current slump once again reinforces the theme of diversification. A quick scan of the Red sea shows the obvious - funds with well-spread out portfolios have lost less than the category average. At the same time, restructuring of portfolio by some of the tech-heavy diversified funds of 2000 has also started to yield results. For instance, Birla Advantage has slipped only 14.7% while Prudential ICICI Growth Plan has fallen even less at 12.89%.

The selling wave notwithstanding, most funds make a compelling case for investment today with top quality stocks. The technology sector, which has spearheaded the volatility, is witnessing a bout of uncertainty in the short-term with a slowdown in US economy. Yet, the fundamentals of top-tier Indian software companies continue to remain strong. Besides, other sectors of the economy have got a prop by the budget and with restructuring, they should see an improvement in the bottomline. The sharply beaten down share prices could see fresh acquisition moves.

Thus, do not panic and redeem to turn your notional losses into real losses. And, if you are the savvy lot, add to your existing portfolio for the long haul. This is all the more important for investors, who had put money at the peak of the rally last year and now need to bring down their total cost of investment. Consider this. Had you invested Rs 10,000 in KP Infotech at Rs 50 last year, your loss today would have been a whopping 70% with the NAV dropping to Rs 15. However, if you invest the same amount at current levels, your average loss would be reduced to only 35%!

The Massacre Victims
  Top Losers  28-Feb  12-Mar  Return (%)
  ING Growth Portfolio 12.45 8.06 -35.26
  UTI Software 12.93 8.84 -31.63
  KP Infotech 21.8 14.93 -31.51
  K Tech 5.307 3.646 -31.30
  Magnum IT 11.1 7.66 -30.99

The Massacre Victims
  Top Gainers  28-Feb  12-Mar  Return (%)
  UTI Pharma & Healthcare 11.08 10.39 -6.23
  KP Pharma 9.91 9.31 -6.05
  Alliance Buy India 5.67 5.33 -6.00
  UTI Petro 15.48 14.63 -5.49
  JM Basic 16.04 15.95 -0.56