The Hindu Business Line : New fund schemes quiver under bear onslaught

Equity funds that were introduced in 2006 are quickly going under, their latest NAVs a harsh reminder of the bearish sentiments that are now firmly ruling the stock market.

The list of new offers - alphabetically speaking, these begin with ABN AMRO Future Leaders Fund and end with UTI Leadership Fund - is splashed with red.

The reason is not far to seek: Equity valuations have plummeted, a trend that is reflected adequately in the recent decline in the indices.

For the record, the Nifty (which dropped by over three per cent on Monday) has gone down substantially since the three-year bullish trend started reversing.

Not only have some of these funds gone well below the Rs 10-mark, but the dip has also visibly affected schemes such as Kotak Lifestyle, Principal Infrastructure and JM HI FI. The NAVs in these cases are down to such low levels as Rs 7-8.

The decline, which has led investors to shoot a barrage of questions to fund houses, seems to have startled MF circles.

A section of them, however, is urging clients to reinforce their commitment to the funds that they have already purchased.

"We are advising people to buy in phases and wait for the market to reach a bottom of sorts," said Mr Prabal Nag, who heads marketing at JM MF.

It may be mentioned that some 20 equity funds have been launched since January this year.

These include products designed by leading players like UTI (Leadership in January and Contra in March), Franklin Templeton (Equity Income Fund, inception in April), and Reliance (Equity, March).

A clutch of smaller fund houses, including ING Vysya (A.T.M Fund), Sahara (Infrastructure), and DBS Chola (Contra), also came up with their offerings.

The situation, which is widely suspected to have prompted redemptions, should be seen objectively by investors, according to Mr V.P. Chaturvedi, CEO of Tata MF.

"Prices are more realistic today than before, a fact that investors can't afford to ignore. Inrswho have a horizon of three years or so should actively consider entering now."

Among the new funds in the Rs 8-10 range (as on June 10) are Fidelity India Special Situations (Rs 8.76), SBI Blue Chip (Rs 8.96), Quantum Long Term Equity (Rs 9.31), Sundaram Rural India (Rs 9.59) and UTI Contra (Rs 8.10).

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