Financial Daily from THE HINDU group of publications
Monday, Apr 17, 2006
Financial Daily from THE HINDU group of publications Monday, Apr 17, 2006 |
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Markets - Outlook Columns - Mutual Confidence NILANJAN DEY
When you read this on Monday morning, do you feel spooked because the market has lost a neat 400 points and more in just two sessions last week? Are you now willing to pull out or do you view this as an opportunity to buy stocks cheaper, either directly or through equity funds? Before you sit down with the latest NAV table and calculator, consider some of the more important trends that determine the contours of the market at the moment. For one, sharp decline or otherwise, not much seemed to have changed in the average Joe's mindset. In fact, a new financial year has started and Corporate India has just begun to declare its March-end numbers. IT leader Infosys has announced its Q4 results, complete with special rewards for shareholders in its silver jubilee year. Reliance Petro is doing an IPO to finance a project of mammoth proportions. Some of the newer equity funds are yet to fully invest what they collected. Overall, the mood is not too disturbed and there is no major reason to complain. Or so we thought. Valuations - over-stretched, extra-ordinary, fair-value-plus, the adjective is for you to choose - however, have played the spoilsport. Some investors obviously did not like them and wanted to move out. And they indeed moved out in style, as the big negative trend spotted last week has indicated. The question is: Is this the beginning of a comprehensive, deeper correction? Or is this just the market's way of cooling what had clearly become very hot. After all, the Sensex was rapidly closing in on 12,000 points. Before you come to conclusions, let us tell you that fund managers readily acknowledge the fact that stocks have run up hugely and their portfolios are generally facing greater risks today than before. Let us also wallow in some historical data at this stage. Diversified equity funds have provided an average of over 70 per cent in the past one year (as on April 13), a figure that will perhaps impress even the most demanding investor. The score is 30 per cent-plus if you consider the past six months. Fund houses, large and small, agree with the view that there could well be large-scale uncertainties in the days ahead. No investment professional will want his carefully-constructed portfolios to erode and his funds to slide down the performance charts. But unit holders, having mandated such professionals to handle their money, should be ready to face bad weather, at least in the short term. On another front, Reliance MF has decided to say `no' to fresh investments of over Rs 5 lakh in Reliance Equity Fund. As everyone agrees, this fund is now part of our investment folklore, thanks to the kind of money (roughly Rs 6,000 crore) its NFO had collected. Now, is there a lesson here for investors? Is fund size a tricky issue that we all must necessarily consider before investing?
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