The Hindu Business Line : FMCG funds move up smartly

FMCG funds never had it so good. It's not that there are too many of them around, but the few that are present are doing fine. FMCG stocks - the Daburs and Gillettes of the world - are moving up quickly, a trend that is being reflected in the NAVs of the funds that are chasing them.

Compare this scenario with what had prevailed even one and a half years ago. The market at that point of time loved to hate the sector and the stocks concerned were a strict no-no for many players. If you had entered any of the FMCG funds in those days and stayed loyal to your allocations, you would have ended up with pretty decent returns.

The point is, we normally fail to see the bottom. This time, it may have happened in the case of FMCG.

The next big thing could well be the capital goods sector. Or, may be, shipping. No one can say for sure which segment of the economy will turn for the better, leaving the worst behind.

There is a lesson in all this for somebody who invests in mutual funds. The lesson is simple: Do not wait for the bottom to arrive, invest in your favourite funds now and keep on investing in them in small, regular doses. This, as many experts point out, will ultimately help you to create a better portfolio, one that is tuned towards improved returns over a period of time.

Remember the heady days of technology stocks? Do you recall the tech funds that soared as a consequence? Investors - a good number of them actually - made a beeline for tech funds when the tech boom became part of everyday conversation. Many of them suffered later when the boom turned into bust. Entire portfolios were ruined and money simply went down the drain. We do not want those days to come back, do we?

On another front, as things stand, most fund houses are maintaining their views on the market. As for major factors like inflation, fund managers remain worried on this count. One of them, Mr A.K. Sridhar, CIO of UTI MF, bills inflation as a concern but hopes to see stronger growth in IIP in the coming months. Inflation, he adds, should become more manageable if oil prices do not rise sharply from here.

For the IPO investor, there is news in the shape of fresh proposals. These have come from, inter alia, SBI MF and Prudential ICICI MF. A couple of new schemes (Birla MF's Gennext Fund and Kotak Mahindra MF's Contra Fund) are open for subscription.

Meanwhile, MFs' penchant for mid-cap products continues. Tata MF is the latest to fall for it; its new scheme will invest in companies that are either included in the CNX Midcap 200 index or in ones that are within its market cap requirement. It needs to be mentioned here that investors should approach mid-cap stocks very carefully. A fund manager's stock-picking abilities are truly tested in the mid-cap domain.

Feedback may be sent to nilanjan@thehindu.co.in

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