If there was a month that was action-packed for both political and economic reasons, then July 2008 would be the one. Nonetheless, after all the turbulence, markets still closed in positive terrain.
The BSE Sensex posted a gain of 6.64% during the month to close at 14,356 points; the S&P CNX Nifty appreciated by 7.23% to settle at 4,333 points. The CNX Midcap rose by 5.69%, before settling at 5,537 points.
In July 2008, Foreign Institutional Investors (FIIs) were net sellers of equities to the tune of Rs 10,129 m. On the contrary, mutual funds were net buyers with purchases of Rs 8,075 m.
Nowadays, one of the most common queries from visitors on our website is - which is the best SIP? To a financial planner like Personalfn, which has gone to great lengths to introduce SIPs (systematic investment plans) to its clients over the years, this can be a very disturbing question. It shows that investors keep hearing the term SIP so much that they begin to believe that it's an investment in itself. SIPs are a mode of investing in mutual funds. So typically, investors must first identify the fund that is best for them (i.e. one that is right for them) and then do an SIP in it.
Monthly top performers: Open-ended equity funds
| Equity Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
| JM HI FI |
8.74 |
16.78% |
-40.49% |
-24.10% |
| ING Dividend Yield |
12.93 |
15.34% |
-15.93% |
1.73% |
| ICICI Pru. Infrastructure |
24.53 |
14.15% |
-19.39% |
11.65% |
| JM Telecom |
10.52 |
13.95% |
-17.38% |
-13.45% |
| DBS Chola Multi Cap |
15.61 |
13.94% |
-25.28% |
-17.63% |
(Source: Credence Analytics. NAV data as on July 31, 2008.)
Sector/thematic funds dominated proceedings in the equity funds segment. JM HI FI (16.78%) emerged as the top performer. ING Dividend Yield (15.34%) and ICICI Prudential Infrastructure (14.15%) occupied second and third positions respectively.
Another common query that ranks high on the investor's list of concerns “ should I redeem my equity funds? In our view, the answer to this question lies with the investor more than the financial planner. If the investor has well-defined investment objectives and the right portfolio (i.e. the right investments in the right allocation), there is no reason why the current market conditions should overwhelm him. So rather than exiting, he can take the opportunity to add to his investments. However, if the investor does not have the right portfolio in place, then yes, the market volatility can prove very daunting. Our team of financial planners recently met one such client who was very disturbed with the market turbulence. After discussing his financial plan, it was clear that here was an investor who had identified his objectives clearly, but was a victim of poor execution.
Monthly top performers: Long-term debt funds
| Debt Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
| JM GSec |
22.38 |
1.44% |
1.27% |
4.19% |
| Escorts Floating |
11.90 |
1.17% |
4.35% |
9.05% |
| Templeton GSec |
18.45 |
1.03% |
1.12% |
9.61% |
| Tata Dynamic Bond |
13.50 |
0.82% |
4.59% |
8.55% |
| HDFC Floating |
13.88 |
0.82% |
4.81% |
9.41% |
(Source: Credence Analytics. NAV data as on July 31, 2008.)
JM GSec (1.44%) occupied the top slot in the long-term debt funds segment, followed by Escort Floating (1.17%). Templeton GSec (1.03%) and Tata Dynamic Bond (0.82%) also featured among the top performers.
Monthly top performers: Balanced funds
| Balanced Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
| BOB Balanced |
25.24 |
12.83% |
-16.84% |
1.37% |
| Canara Robeco Balanced II |
39.10 |
8.34% |
-17.35% |
-3.19% |
| UTI Balanced |
55.61 |
8.11% |
-18.41% |
-6.36% |
| HDFC Balanced |
33.23 |
8.10% |
-12.92% |
0.94% |
| UTI Variable Invest IIP |
15.40 |
7.84% |
-15.33% |
-10.86% |
(Source: Credence Analytics. NAV data as on July 31, 2008.)
BOB Balanced (12.83%) topped the balance funds segment. Canara Robeco Balanced II (8.34%) and UTI Balanced (8.11%) made it to the top performer's list.
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FMPs: Beware of the credit risk
If there is one investment that has gained in popularity among a large category of investors it is the FMP (fixed maturity plan). Yields on FMPs are usually very competitive compared to FDs (fixed deposits). Add to it the fact that FMPs offer superior tax-adjusted returns vis-à-vis FDs and it is clear why FMPs are particularly popular with low-risk investors. While FMPs continue to remain popular, the credit risk associated with them has increased over the recent past. Not surprisingly, many fund houses now state upfront that their FMPs will not invest in certain high risk industries like real estate, broking and non-banking finance companies (NBFCs). Investors would do well to factor in the credit risk before making any investment decision.
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