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Nilanjan Dey

Kolkata , Aug. 19

PUNTERS are having a field day in getting in and out of equity funds, their neat moves supported by a rise in the stock markets, reflected in increases in net asset values.

A section of investors have lately found merit in entering, exiting and re-entering a whole range of equity funds, which have leveraged the general bullishness to provide above-average returns. The idea is to make a quick killing before a serious correction sets in to stall and reverse the trend.

The situation is evident from the recent surge in transactions, volumes of which have shot up partly because of the quick entry and exit strategies that are being pursued. The trend is a result of fresh inflows as well as switches to equity schemes from other investments, predominantly debt schemes.

Mutual Fund distributors describe the scenario as a natural fallout of market realities. "Our experience suggests that allocations have been modified substantially in favour of equities," said Mr Sandeep Parwal, head of SPA Capital, adding that some investors have already reached their appreciation targets. "A number of them have considered pulling out, while others have rued the fact that their allocations were not large enough," he maintained.

Some observers feel that investors in equity funds by and large are getting greedy again, a state that often encourages them to `time' the market. This, financial planners say, is fraught with risks. According to Mr Rajiv Bajaj, Managing Director of Bajaj Capital, planners will perhaps consider advising their clients to book profits at various stages of growth.

"If you had invested a lakh of rupees in April and have recorded, say, Rs 40,000 in profits, you will do well to shift your appreciation to debt funds. Stay invested with the original with a stop loss of 10 per cent or so. Even if the market falls, you, as a disciplined investor, will be able to gain substantially," he noted.

MF circles also feel that dividend distribution policies followed by some fund houses have contributed to the situation. Investors are often drawn towards these payouts in large numbers, some of them stripping the dividends and exiting from the schemes concerned immediately after the record dates.

As intermediaries point out, a few players have indeed declared sizeable dividends in recent times. The case of Reliance Vision Fund, which had declared a 25 per cent dividend on June 25, may be cited as an example. An investor who had entered the scheme on that day had to do it at an NAV of Rs 30.34, which, after the load, came to Rs 30.95. In case, he or she decided to move out on August 18, the applicable NAV would have been Rs 32.61 and the sales price Rs 33.26. This clearly underlines the fact that the investor has recorded some capital appreciation even after securing the 25 per cent dividend.

The trend is expected to remain for some more time, at least till when dividends remain in vogue. While the likes of Franklin Templeton have already made news on the payout front, players like Birla MF are set to do it over the next few weeks.

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