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A solid performance

Aabhas Pandya

If the mayhem on the bourses and the sharp erosion in net asset values (NAVs) of equity funds has made you jittery, a peep into history might just soothe your nerves. The diversified equity and sectoral funds are still up an average 47.53 per cent from their mid-May 1999 levels.

For instance, had you invested in Kothari Pioneer Information Technology Fund on May 11 last year, your return would have been a whopping 232 per cent in the last one year. The fund's adjusted NAV has vaulted from Rs 18.9 on May 11, 1999 to Rs 65.06 as on May 11, 2000 after adjusting for the 1:1 bonus and dividend payouts.

Alliance Equity from Alliance Mutual Fund is still up 116 per cent despite the fall in equity prices in the last month. The fund's NAV is hovering around Rs 36 against Rs 17 a year ago. As many as 14 equity funds (excluding their option) are still up over 50 per cent over their last one-year levels. Even Templeton India Growth Fund, with its value investment strategy, has given a one-year return of 58.12 per cent. In the same period, the BSE Sensex is up only 5.3 per cent from 3900 to 4100 levels in the last one year.

However, these returns will taste sweet only to those investors who had entered equity funds early last year. Buoyed by the tax sops to equity funds in the 1999-2000 Budget, coupled with the penchant for the infotech, communication and entertainment (ICE) sectors, investors poured millions into equity funds including IPOs since April last year.

Besides, funds lured investors by doling out hefty dividends. Hence the timing of entry into a particular fund is crucial for determining returns to a particular investor. "The entry of an investor in a fund is absolutely critical. Given the sharp rise and then the decline in the last one year, returns would vary and often, drastically from one investor to another," says Nikhil N Khattau, CEO, Sun F&C Mutual Fund.

On the other hand, there are as many as eight funds which have given a negative return in the last 12 months. Out of these eight funds, four belong to Unit Trust of India. UTI's Grandmaster has lost almost 14 per cent in the sell-off. The other UTI funds, which have lost are UGS 10000, Masterplus '91 and Mastergain '92. The fall in NAVs is partly attributed to UTI's investments in ICE stocks at high valuations last year.

The downslide in the markets has particularly impacted those investors who entered equity funds towards the fag end of calendar 1999 or early 2000. A large section of these investors came in droves to put money in technology funds. The six technology funds, for which NAVs are available, have show an average fall of 25.27 per cent on their offer price of Rs 10 per unit. The fall has been rather steep in funds like Alliance New Millennium, where the NAV vaulted to Rs 18.45 in less than two months. In fact, a number of fresh investors entered funds like Alliance New Millennium and IL&FS e-COM at higher levels and have consequently seen their investments plummet.

So, what should an investor, with a hefty one-year gain in KP Infotech or Birla Advantage do in this volatile market? Clearly, it depends on an investor's outlook. If you are the risk-averse type but climbed the equity bandwagon in a sudden rush of blood or on your friend's advice, redeem your bulging returns. On the other hand, if you are supremely confident that the markets will bounce back, stay invested.

A third case could be where you have suffered a notional loss - with the NAV dropping below the price at which you had bought. If you exit now, you will only turn your notional losses into real. Though it is difficult to predict the market, fundamentally the outlook has improved in the last one month - corporate results have been good and industrial production is picking up. Except for sentiment, there is hardly any reason why the markets should not climb back.

TOP FIVE GAINERS

Fund	NAV (Rs) on May 11, 2000	NAV (Rs) on May 11, 1999	Change (%)
KP Infotech (D)	65.06	19.61	231.75
Alliance Equity (D)	36.15	16.75	115.83
Birla Advantage	52.32	24.92	109.95
KP Bluechip (D)	50.24	25.91	93.91
GIC Growth Plus II	22.28	11.68	90.75

TOP FIVE LOSERS

Fund	NAV (Rs) on May 11, 2000	NAV (Rs) on May 11, 1999	Change (%)
Grandmaster	11.08	12.82	-13.59
Boinanza Exclusive	6.82	7.72	-11.66
Canbonus	14.45	15.99	-9.66
Dhanvikas (1)	8.09	8.57	-5.60
Master Plus '91	21.55	22.52	-4.30

Fund Strategy

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