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Suresh Krisnamurthy

THE story of impressive gains by debt funds continued for one more quarter, with diversified funds recording, on an average, 12.7 per cent in annualised terms. Gilt funds did even better, with returns of 20 per cent, annualised. Tata Gilt Securities Fund and Escorts Gilt Plan gained nearly as much as the Sensex did over the quarter.

The performance of debt is impressive, coming as it does on the back of a more than 20 per cent jump recorded by gilt funds in 2001, and the over 15 per cent recorded by diversified debt funds. The gains were largely due to the fall in yields on government securities before the Budget.

Post-Budget, the prices of government securities have fallen. However, gilt and debt funds have restricted the adverse impact of the decline in yields, perhaps by booking profits and exiting from the long-term securities. The spate of dividend declarations by income and gilt funds suggests that this may have been the case. Consequently, the performance of these funds for the quarter appears impressive.

Toppers for the quarter: The differentiating factor among diversified income funds was the percentage of net assets parked in gilt securities. The more the fund was focussed on gilts, especially long-term issues, the better the performance in terms of returns. Funds such as PNB Debt Fund, Alliance Income, Pioneer ITI Income Builder and JM Income Fund, with 40 per cent or more invested in government securities, topped the list. The average portfolio maturity of these funds was also quite high. Funds that finished at the bottom of the ladder in terms of performance were those that had a lower average portfolio maturity. These include Dundee Corporate Bond Fund, Dundee Public Sector Bond Fund, Birla Bond Plus and LIC MF Children Fund. These funds returned less than 2 per cent during the quarter.

Among the gilt funds, the toppers were Tata Gilt Securities, Escorts Gilt Plan, Templeton India Government Securities Fund, Birla Gilt Plus and HDFC Gilt-Fund (Long-term). These funds recorded growth of more than 5.5 per cent in the quarter ended March 2002. The average portfolio maturity of these funds was between 8 and 11 years. Short-term plans: Short-term plans also recorded impressive gains during the quarter. Short-term gilt funds outperformed short-term diversified debt funds. In addition, fixed maturity gilt funds outperformed fixed maturity diversified funds.

Major performers among short-term gilt funds were Birla Gilt Plus, IDBI Principal Gilt fund and SBI Magnum Short-Term. Among diversified funds, Prudential ICICI's Short-Term plan and Grindlays Super Saver Income Short-term recorded returns of over 1.75 per cent. Fixed maturity plans launched by Birla Mutual Fund, Prudential ICICI and Kotak Mahindra returned over 1.5 per cent for the quarter.

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