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Balanced funds the only option - Views on News from Equitymaster
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  • Mar 29, 2001

    Balanced funds the only option

    In the midst of a crisis on the stock markets wherein most funds are striving to generate returns, balanced funds have surprisingly performed better than their peers.

    The above graph is evident of the slump on the Sensex over the past 1 month. Balanced funds, having about 60% - 70% of their exposure in the equity markets, have seen the value of their equity investments erode considerably. Fund managers, who were just beginning to recover from the tech meltdown, have been hit by the latest crisis in the markets. Indeed, losses on the bourses and consequently the erosion in Fund assets, has been significant.

    Open-ended, Balanced Schemes NAV
    JM Balanced Fund (Gr) 9.9 4.5% -4.2% -32.7% 6.4%
    Franklin Balanced Fund(Gr) 8.5 1.8% -6.7% 0.0% -12.3%
    IDBI-PRIN Bal. Fund(Gr) 9.3 1.3% -7.5% 0.0% -7.9%
    K P Balanced (Gr) 8.0 0.8% -8.7% -28.5% -21.6%
    K P Pension Plan (Gr) 16.6 0.4% -3.2% 7.1% 13.6%
    HDFC Balanced Fund (Gr) 9.3 0.3% -6.0% 0.0% -6.5%
    Dundee Balanced Fund (App) 6.6 0.2% -12.3% 0.0% -24.3%
    Tata Young Citizens 9.7 0.2% -7.6% -24.0% 14.2%
    Sundaram Balanced Fund (Gr) 9.1 0.1% -7.0% 0.0% -10.0%
    Unit Scheme-1995 (Gr) 165.0 0.1% -6.1% -18.9% 17.5%

    Returns over 12 months are annualised

    However, by virtue of their being balanced, ‘balanced funds’ have been able to limit the extent of losses. This is mainly due to a boom in the debt markets, where balanced funds park their remaining 30 – 40% of their assets. The interest rate cut announced in the budget, and the subsequent Bank Rate cut announced by the RBI, drove up bond prices, resulting in windfall gains for investors. This helped offset the losses incurred on the equity investments of these funds.



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