Financial Daily from THE HINDU group of publications
Saturday, Jun 10, 2006
Financial Daily from THE HINDU group of publications Saturday, Jun 10, 2006 |
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Stock Markets Markets - Mutual Funds Nilanjan Dey
A FILE picture of a grim-looking trader at a share trading house in Kolkata on May 22 when the BSE Sensex tumbled by historic 1100 points. - A Roy Chowdhury
Kolkata , June 9 Diversified equity funds have had a devastating run in the past four weeks, losing nearly 30 per cent since the market started falling in a big way. Some well-known schemes figure in the roster of losers, while a few relatively lesser-known names are also included. While Friday's 500-point-plus rally has somewhat eased the tension that was felt throughout the week, the considerable decline in NAVs of these broad-based schemes reflects the sharp pullback in stock prices, MF circles observe. The fund industry's view stems from the drop in indices seen since early to mid May. Among them is the popularly quoted S&P CNX Nifty, which was at 3,700 points on May 11, a critical day in the context of the recent fall. The 50-share index closed at 2,724 points on Friday.
`Lay investor confused'
Mr Ved Prakash Chaturvedi, who heads Tata MF, sees the trend partially in the backdrop of certain telltale international developments. "We cannot hope to be immune to such phenomena. These have rendered our market's present limitations quite conspicuous," he said. The past month - Value Research puts the one-month decline at 29.08 per cent (as on June 8) - has posed a stiff challenge for the asset management sector in terms of retaining investor interest, fund houses concede. Mr Rajan Krishnan, who has recently taken charge as Principal MF's business head, feels that the sudden downswing has spooked some sections considerably. "The lay investor is probably a bit confused at the moment. The stakes had indeed gone up for him when the market was at a high. That bullish undertone seems to be receding", he noted. The asset management sector by and large agrees that it will not be easy for the average investor to feel upbeat about equity funds - unless the trend reverses substantially. Marketing honchos, like Mr Prabal Nag of JM MF, support the view that the ordinary participant has indeed become panicky.
New set of triggers
"While a major bounce-back may not happen immediately, investors need to appreciate that several aspects of the market have not changed. What we now need is a set of new triggers. These will help improve valuations", Mr Nag said. The latest drift is inducing fund houses to encourage fresh allocations, and not without a reason. New buying by existing investors will enable an averaging out of costs, it is pointed out. Those who are brave enough and are willing to stake out at this stage will be able to report gains one or two years down the line, it is felt.
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