The Hindu Business Line : Shorter-term debt funds in focus

That question, we are sure, is haunting a large number of investors, especially those who are badly caught in equity funds that have seen their NAVs decelerate in recent days. Coupled with pronouncements that the Indian market will now lose some of its shine, the question becomes even more ominous for them.

And while the market is worried about equity, shorter-term debt is in the news, thanks to the possibility of rising yields. The result is that some sections are willing to consider debt more closely than before. Or so suggest distributors who are aggressively pushing short-term debt products.

Pundits, however, are still quite willing to promote equity, irrespective of the latest situation. Regular investments, they say, are important for all market conditions and investors must allocate to stocks and keep them over longer periods of time. The distilled opinion is that all this is necessary for securing optimum returns.

Let's now take a quick look at the returns charts to establish the latest performance patterns. Data put out by fund tracking agency Value Research indicate that all manners of equity funds have lost money in recent weeks.

In fact, if you had certain sectoral funds, your losses over the past one month or so would have been quite high. We are of course referring to auto and banking funds, which have lost 14-15 per cent (one-month data, as on March 8). In comparison, diversified equity funds - tax-planning funds are included in this list - have lost about 11-12 per cent over the same period.

Certain categories of debt funds have provided 0.5-0.6 per cent in the one-month period ending March 8, buttressing the view once again that debt can indeed be a great relief.

The other major view - fund circles have discussed this slightly contentious topic before, but this needs reiteration now - is that investors can consider scaling down their equity exposure as they grow older.

In other words, as you age, the portion of your portfolio parked in equities needs to reduce. However, this, you may feel, is not really a standard principle; it is clear that at least some elderly investors will not agree with the (for want of a better term) `zero-equity' idea.

Slew of NFOs

At another level, a few interesting offer documents have been filed with SEBI in recent days. Some of the very recent ones are Tata Income Rollover Fund, DSP Merrill Lynch Focus 25 Fund and Fidelity International Opportunities Fund. These proposals in a manner of speaking reflect the sort of ideas that are being tossed around in asset management circles.

Among these, Tata MF's proposal seems to be quite topical; its Income Rollover Fund will have three different schemes, each with a portfolio bearing a specific maturity profile. There will be three series under each scheme.

DSP ML's proposal is aimed at holding a "core position" of 20-30 stocks. It will have a "non-diversified" portfolio and will invest mainly in stocks of large companies that are chosen for their growth potential. The other inclusions will be companies selected on the basis of contemporary trends and fundamental parameters. We do not have too many of these concentrated products in India. It needs to be seen how investors take to it once the roll-out actually happens

Feedback may be sent to nilanjan@thehindu.co.in

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