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MFs - Passive investing has been more than active

Apr 28, 2000

Generally Index funds find few takers as the philosophy of passive investing offers mediocre returns in a bullish market. This is mainly why Index funds have under-performed growth funds over the past few months. However, given the depressed state of software stocks, the fall in Index fund net asset values (NAVs) has been less pronounced vis--vis growth/software funds. There was a time not so long ago, when the aggressive mutual fund investor did not look beyond growth/software funds, which rode the exceptional performance of software stocks. Index funds were meant for weaklings who did not have the heart (and money) to bet on growth funds. So growth/software funds made a lot of hay, while the (software) sun was shining, so to speak. But when the sun stopped shining, growth/software fund NAVs plunged dramatically.

Open-ended -
Index Schemes
Benchmark
Index
NAV
(Rs)
Last
week
Last
month
Last
year
Since
inception
Index I-NIT 1999 Nifty 11.0 2.5% 1.8% 0.0% 7.0%
UTI Nifty Index Fund Nifty 8.3 -3.4% -12.2% 0.0% -12.2%
UTI - Master Index Fund Sensex 13.8 -5.1% -13.4% 36.6% 30.4%

Over-enthusiastic (and ambitious?) fund managers of growth funds had large exposures to software stocks, far in excess of the BSE Sensex, which has a 30% exposure to the software sector (NSE-50 20% exposure). Consequently Index funds (benchmarked against the Sensex and the Nifty) posted lower fall in NAVs than the growth funds.

Open-ended -
Growth Schemes
NAV
(Rs)
Last
week
Last
month
Last
year
Since
inception
Primary Equity Fund 17.5 -5.4% -16.9% 58.8% 11.3%
ING Growth Portfolio (Gr.) 22.0 -5.4% -31.8% 0.0% 124.3%
GIC Fortune 1994 6.5 -5.7% -14.1% 22.8% -7.0%
Pru ICICI Tech. Fund (Gr) 6.7 -6.0% -33.9% 0.0% -31.7%
Kothari Pioneer Prima Fund (Gr) 24.5 -7.2% -20.6% 80.1% 15.0%
UTI Sector Fund - Brand Value 10.7 -8.3% -19.4% 0.0% -0.3%
Birla MNC Fund (Growth) 29.8 -9.7% -18.4% 139.9% 21.9%
Birla IT Fund (Growth) 21.8 -9.7% -34.7% 141.0% 17.9%
GIC Growth Plus II 18.1 -10.3% -18.1% 142.7% 11.8%
Birla Advantage Fund 43.2 -12.0% -29.9% 131.5% 39.9%
Grandmaster 1993 10.6 -14.0% -38.8% 8.4% -2.0%
Libra Leap 20.1 -15.3% -41.4% 137.1% 37.3%
UTI Sector Fund - Software 23.9 -15.7% -42.3% 0.0% 83.5%
Magnum Global Fund 12.8 -16.3% -37.3% 54.4% 7.1%
IL&FS Growth & Value Fund (Gr) 14.7 -16.3% -39.0% 0.0% 21.6%
Magnum Sector Funds - IT 17.4 -16.4% -41.3% 0.0% 144.0%
IL&FS eCOM Fund (Gr) 7.0 -17.9% -43.7% 0.0% -48.9%
Magnum Multiplier Plus 1993 22.1 -19.6% -40.9% 81.5% 13.7%
Magnum Equity Fund 16.4 -22.5% -46.8% 99.8% 17.9%


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