Financial Daily from THE HINDU group of publications
Monday, Mar 18, 2002

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MFs try to beat volatility

Nilanjan Dey

Volatility remains a fact of life on Indian bourses. As marketmen found out last week, stock prices fluctuated wildly while trying to keep pace with shifting preferences. NAVs of equity funds too moved up and down and as a result valuations were somewhat jittery.

Volatility or no volatility, frontline MFs are doing their best to court the market. And the focus this time is distinctly on equities. A section of equity funds, for instance, have started a no-load drive. There are others who are trying to woo the more discerning investor on the basis of changes they have made in their portfolios.

As for these changes, funds have been cautiously adding and removing stocks to and from their list of holdings. There have been some recent cases of profit-booking, especially in sectors such as software and media. A number of equity funds are holding on to their views on such segments as pharma, IT and automobiles.

A large section of fund managers are of the opinion that equity markets are set to look up, thanks partly to the ongoing disinvestment exercise. Given the recent experience (read IBP and VSNL) with the Government's disinvestment programme, there seems to be little doubt that other public sector majors too will prompt a positive response from the market.

On the debt side, the rest of March could prove a bit more volatile for the bond markets. Going forward, the outlook for the market seems to be positive... or so say leading fund managers. The apex bank, it appears likely, will retain its strategy on soft interest rates. There will be reasonable liquidity as well. All these are prompting most players to predict a favourable bias for the rate regime, especially over the medium-term.

Some funds, meanwhile, are sticking to their position on fixed maturity schemes. Pru ICICI, for instance, seems to be actively pushing its one-year-plus plan, aimed to provide, inter alia, double indexation benefit to investors.

Such a plan invests in a portfolio of fixed-income securities maturing in line with its time-profile. The plans, each with a separate portfolio of securities, are expected to generate a more predictable return.

As for new scheme proposals, SUN F&C has lined up a fixed-income securities fund; it has sought SEBI's approval for the offer document as well.

On another front, funds have been coming up with interesting ways to beat the Budget. HDFC MF, for instance, has tried to brand it as SWAP — Systematic Withdrawal Advantage Plan — a facility under its income fund that seeks to lessen the tax impact on dividend income.

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