Weak markets present an opportunity
May 30, 2002

Author: PersonalFN Content & Research Team

The last couple of weeks have seen equity markets nosedive due to the prevailing Indo-Pak tension. Mutual funds, particularly, equity funds have witnessed the impact of this decline as net asset values (NAVs) slumped sharply. However, equity fund investors have an opportunity at these levels that needs to be exploited.

The BSE Sensex has nosedived from 3,442 points to 3,114 points in a week's time. That's bad news for existing investors. But potential investors can exploit this slump by investing in an equity fund right now. Conservative investors can invest in an index fund linked to the S&P CNX Nifty, which is more broad-based (with 50 stocks) than the BSE Sensex (30 stocks). Aggressive investors can buy into an actively managed fund with a good track record.

Growth Funds	NAV (Rs)	1-WK	1-MTH	6-MTH	1-YR	INCEP.
PIONEER I PRIMA FUND G	26.5	2.3%	-3.4%	32.0%	30.3%	12.2%
ZURICH I EQUITY G	21.0	-2.5%	-5.6%	16.8%	13.2%	11.4%
BIRLA MNC G	28.8	-0.3%	-5.5%	12.1%	10.9%	15.2%
TEMPLETON GROWTH G	12.4	-0.9%	-3.4%	5.5%	-0.5%	5.9%
ALLIANCE EQUITY G	25.7	-0.7%	-5.7%	11.4%	-5.1%	27.4%

(NAVs as on May 28, 2002. Growth over 1-Yr is compounded annualised)

With the markets in a freefall, the dilemma in the minds of investors is how do we know the markets won't fall further. To be sure, there is no way to answer that question with certainty. However, there is a way to take care of that eventuality. The Systematic Investment Plan (SIP) is one way to tide over market volatility. Even equity fund investors who are already invested in the market and have seen an erosion in their investments, can average their cost by entering at these levels.

Investors could do one of two things. They can cringe at the sustained weakness in the markets and decide they want to have nothing to do with it. Or they could decide to be a little brave and invest in a well-managed equity fund or even an index fund. Remember the last time the markets fell so badly, post USA attacks in September 2001, they rebounded strongly to post a 20% growth in less than 6 months. Luck favours the brave and its no different with equity investments.

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