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Monday, May 26, 2003

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Time to enter equity funds?

Nilanjan Dey

EQUITY funds might just stage a comeback, at least for a short while, if recent trends are any indication. It is still early days yet but a number of equity funds are seen to be steadily mobilising fresh inflows, backed as they are by good performance.

Select funds, most of them diversified with allocations farmed out over a number of sectors, have lately done well in terms of returns. A few (like Birla MF's scheme based on the `dividend yield' theme) have moved up substantially in the last few days. While past performance may not be sustained in future, some quarters seem to think that this is again the time to look at equities.

Investors are quite aware of the fact that the broad market indices are not any where near their historical highs. However, money is still moving into the top equity-oriented products in the hope of an early upside — a drift that is being fuelled by initiatives taken by the distributor community. But the mass market is still shying away from these funds, preferring to wait and watch for a definite trend to appear on the horizon.

For those who have the patience to wait (especially investors who have age and time on their side) may find it worthwhile to enter equity funds at this stage. After all, we have come some distance from the point when the last bull market collapsed (in 2000). Equities have been in the dumps for far too long.

Banking stocks have been in the limelight in recent months and certain vigilant fund managers have indeed managed to take advantage of their north-bound movements. Reliance Capital MF has gone a step ahead to come out with a fund dedicated to the banking sector, with a lot of flexibility with regard to its investment strategy. It is actually the first of its kind in India, and will not get lost in the maze dominated by tech/FMCG/MNC/pharma/petro funds in a hurry.

There are no clear patterns insofar as other sectors are concerned. No major themes that are sticking out, waiting to be identified by investors. Nevertheless, a few broad concepts — divestment cases, high dividend-paying companies and the like — are being tossed around.

The market is generally wary of the technology counters, especially so after the recent spate of disappointments on the earnings guidance front. Tech funds are not exactly the flavour of the month either, but isolated cases of good short-term performance are not entirely uncommon.

Not too many new launches are scheduled for the next few days. But a few players, which have worked out IPO proposals in the recent past, are waiting for the right opportunity to come their way. Among them is SBI MF, which has lined up a scheme that will offer life insurance to investors.

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