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Carefully Treads the Investor

They detest risk, draw comfort from cash and are able to judge market sentiments better than they did earlier. Asset class changes in 2004 show how cautious Indian investors are

They detest risk, draw comfort from cash and are able to judge market sentiments better than they did earlier.

Here is some evidence. When the uncertainty in interest rates took the wind out of debt funds, investors swiftly switched sides in favour of cash.

The result: debt assets, which accounted for 45 per cent of the Rs 1.38 lakh crore managed by mutual funds at the end of 2003, have lost ground. This declined to a 25 per cent share of the Rs 1.49 lakh crore of assets that funds held now.

On the other hand, cash funds are getting fatter-over the same period, their share has increased from 35 per cent to a dominant 53 per cent. Clearly, investors are switching from debt funds to cash funds.

As far as equity is concerned, Indian investors are still apprehensive about it. Equity assets, which had a 20 per cent market share at the end of 2003, have somehow crawled to 22 per cent at the end of November 2004. Actually, investors may have pulled out from equity funds in 2004.

Between December 2003 and November 2004, equity fund assets are up 20.18 per cent even while the average gain on funds has been 29.21 per cent. This may well means that investors have cashed in on the recent rally in the equity markets and booked profits.

Then & Now
Asset Class  % Share on Nov 30, 04  % Share on Dec 31, 03
Debt 25 45
Cash 53 35
Equity 22 20