• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Nilanjan Dey

LIFE was interesting for investors in index funds last week, thanks to the somewhat positive signals emanating from the equity markets. Their hopes climaxed with the trend that was reflected in the last trading session: the Sensitive Index of the Bombay Stock Exchange recorded a 67-point increase while the S&P CNX Nifty of the National Stock Exchange went up by 23 points. The next few days could well become eventful for these investors if the story continues for some more time.

But witness the latest NAVs of our index funds, and you will come to terms with a rather unhappy scenario. An investor who has stayed with the average index fund in India since inception is probably an unhappy one. His or her experience till date lends credence to the theory that not everyone can make money in index investing in this country.

However, those who had entered index funds at the right time, say after September 11 last year or at other strategic moments, have done a shade better. And to focus on individual funds, investors in the recently-launched HDFC Index Fund are a happier lot today. Their holdings seem to be turning the corner, as reflected in the current NAVs of its Nifty, Sensex and the Sensex Plus plans.

It may be mentioned here that LIC MF too has proposed to launch a similar scheme, calling its version the `Sensex Advantage' plan. Simply put, this will be an attempt to leverage on stocks that do not form part of the BSE index, but are still expected to outdo it over a period of time. The actively-managed part of it will be in the range of 10-20 per cent.

Check out index funds managed by the likes of IDBI Principal, Franklin Templeton, Prudential ICICI or SBI MF. Their current NAVs are mostly below the IPO price of Rs 10. Among the more talked-about funds is Benchmark MF's Nifty Exchange Traded Scheme; its NAV as on August 30 stood at Rs 102.37.

Incidentally, an influential section in the local MF industry seems to be holding different views on the merits of index-based investing. The latter, it is pointed out, is all about passive fund management. There are absolutely no attempts to overtake the chosen index — an idea that does not appeal to most fund managers. As a top MF hand said recently, "index funds are not exciting at all, a simple computer can run them"!

Investors may note that a number of index funds have been floated already and a few more (including one from Birla MF) seem to be in the pipeline. The presence of a decent number of funds would help observers underline critical factors like tracking errors. The latter, if allowed to go beyond a certain level, can really make a difference between two funds mirroring the same benchmark.

It is also pointed out that the Indian investor can only choose from index funds chasing the Sensex and the Nifty. Options, therefore, are extremely limited. What we do not have in this country are funds tracking sectoral indices (such as the BSE TECk made up by technology stocks or even such broad ones like the BSE-200).

Feedback may be sent to blcal@vsnl.net

Send this article to Friends by E-Mail

Stories in this Section
Offloading through bulk deals — UTI-I talks soon with insurance cos, banks

Copyright © 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line