The Hindu Business Line : Will diversified funds pay in 2004?

DIVERSIFIED equity funds will remain the cynosure of all eyes in the early days of 2004. Their net asset values have moved up in tandem with the advancing indices and the rising trend will be sustained if the market continues to stay in the positive territory.

Equity funds had been investing in a number of promising sectors over the past year. Many of their bets have paid off, giving investors a chance to reap capital gains and dividends. It is too early to say whether the same strategies will bring home good returns this year, but fund managers' views on various sectors have not changed entirely. The winning themes such as pharma and auto/auto ancillaries still hold sway in a big way, complemented by the likes of technology, banking and commodities.

Those who had entered equity schemes in the beginning of the bullish phase have made a lot of money by now and may consider taking profits, at least partially. Or so feels financial advisers, many of whom are currently urging clients to pare their exposure. The idea is simple: Book profits while the good times last. And on hindsight, after the market has fallen, this will not seem to be a bad theory after all.

Investors in equity funds are aware of the warnings that are being increasingly issued by sundry quarters. It is being pointed out that the market has already seen a huge rally and a major correction may set in soon. It is also mentioned that 2004 may well see early elections - the picture is still not clear - and a section of the market participants may not find such a situation very comfortable.

It may be mentioned here that a stimulating platter waits for those who are not daunted by such warnings. The sheer diversity of equity products makes it all the more interesting for the discerning investor.

Investors have broad-based growth funds of various hues. Not all of them follow the BSE Sensex or the NSE Nifty as their benchmark indices; a few even have chosen the BSE-200. And then there are the index funds - well-diversified, low-cost and passively-managed by definition.

The more intrepid investor may choose to add value to his holdings through sector funds. At this juncture, there are specialist funds dedicated to areas such as technology, FMCG, pharma, MNCs and petro. Despite their limited investment universe, these could create a difference to one's overall returns if the chosen sectors do well.

Those who wish to track equity funds' performance more actively should also follow the leads that have emerged recently. There is, for instance, the select group of funds that were technology-oriented products till a few months ago. One is specifically referring to the schemes re-worked by Birla, Cholamandalam and IL&FS. It needs to be seen whether some of the others also choose to follow the way shown by what was formerly Birla IT Fund. The latter is now known as Birla India Opportunities Fund.

The performance of mid-cap schemes should be monitored carefully; there are not too many of them so far but there were signs in 2003 that mid-cap offerings will soon occupy a niche of their own. Further, investors should also track the Fund of Funds, the other new category of products.

Feedback may be sent to blcal@vsnl.net

More Stories on : Mutual Funds | Mutual Confidence

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Will diversified funds pay in 2004?

Media stocks back in favour

Indian counters on song

Upbeat market looks for steroids from SAFTA, corporate results

`Wealth is being created within, outside country'