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Getting It Right

Deft equity moves have enabled FT India Balanced fund to beat its growing pains and come out on top. Investor looking for exposure to both equity and debt in a single fund can consider this scheme

While launching in December 1999 at the tail-end of the great tech boom ensured that FT India Balanced's start was rocky, Franklin Templeton's characteristically deft equity investments have ensured that the fund has ended near the top of the balanced funds' hit parade. In 2000, the year of its beginning, the fund committed a third of its portfolio to IT stocks. While the fund broadened its sector exposure somewhat during mid-2000, its tech allocation continued to be high until October that year, when the damage was already done. By the end of the year, the fund had fallen by 16 per cent.

During 2001, even though the stock markets fell, FT India Balanced managed to prevent a matching slide in its NAV by doing a few things right. It generated 18 per cent returns during the pre-Budget rally. When the market fell after the Budget, it guarded its returns through lower (but still high quality) technology allocation. After 9/11, when the market recovered, FT India Balanced matched the equity market on the way up. As a result, the fund ended a bearish year being down just 4.64 per cent.

In 2002, FT India Balanced was the fourth-best performing balanced fund. A 20-per cent plus exposure to PSUs helped it post an 18 per cent gain. Within PSUs, FT India Balanced concentrated on banks and other disinvestment plays, apart from oil stocks. This strategy kept its NAV steady when PSU oil stocks turned volatile.

This year the fund has mostly stuck to large caps so far. Oil stocks like HPCL and BPCL helped it gain heavily, at least till the Supreme Court decision on HPCL disinvestment confused the situation. SBI, ITC, IOC and GAIL are other stocks that have boosted FT India Balanced this year.

On the fixed income side, the fund has preferred corporate bonds to gilts. With an average gilt exposure of a mere 5 per cent, the average portfolio maturity has remained very low-in August 2003, this number was a mere 1.92 years. FT India Balanced's superior equity management has more than compensated for its conservative approach to bonds. This is a classic balanced fund, where the stability of a conservative debt portfolio allows the equity fund manager to be aggressive in looking for gains.