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Life post-badla: Tale of hope and despair

Nilanjan Dey

BY the time you get to the bottom of this column, it would probably be occasion for you to get ready for a badla-free day on the bourses. Like you, mutual funds too have been waiting for July 2 to happen, with the hope that everything would turn up well. After the initial glitches, that is.

In the post-badla era, one would advise them to keep their fingers crossed, what with the uneasiness prevailing in the markets. One thing is pretty certain: This uneasiness has already taken a toll on the funds, and fund managers are doing their best to stay on firm ground. Their recent missives to investors suggest that serious attempts are being made to retain loyal unitholders.

Equity funds, which are currently trying to identify value in a range of sectors, hope to strike it rich when the market moves upward. The market, despite the obvious downward pressures, could turn better if there are enough boosters from the regulators. A major disinvestment drive. A good monsoon. More opportunities due to sustained M&A activity. All of these could be reasons for an upturn.

And, if you are still a believer in the long-term technology story, you may find value in tech funds, many of which are available at low NAVs. Those that are going for less than their IPO prices (Rs 10) include tech funds from such biggies as Pru ICICI, Birla Sunlife, SBI MF and Alliance Capital.

Moving on to fixed income, debt funds seem to be the only things that are happening at the moment. How do these funds compare with other savings products? It is for the investor to decide which type of fund he or she should choose from a range of competi ng options. One could look at them from the point of view of post-tax returns, liquidity and performance -- criteria that should separate the beautiful from the ugly.

As for interest rates, MFs are of the opinion that the long-term outlook is fraught with downward pressures. Also, they are not ruling out short-term volatility.

Fund managers do not presage immediate changes in the ground realities, and the broad contours of the debt market are likely to remain as they are. MFs are only too aware of the tricky issues (such as poor credit offtake) that continue to play the spoils port here.

The next few days would see no new launches. However, one gets to hear that a number of MFs are sitting on proposals for children's plans, index funds and fixed-maturity products.

MFs continue to drive home the point on regular investment, a disciplined approach that would fetch definite benefits like rupee cost averaging. Simply put, this enables an investor to avoid putting in too much when the market is high, and too little whe n the market is low. In other words, it levels out the fluctuations and achieves a lower cost per unit over a time period.

Meanwhile, as transaction trends for the month (up to June 28) suggest, gross purchases of equity were less than gross sales by Rs 123.54 crore. However, gross purchases of debt were more than gross sales by Rs 625.25 crore.

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