Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Income funds turn the tables - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jun 1, 2000

    Income funds turn the tables

    Investors who have invested in growth funds expecting it to outperform income funds are in for a surprise. Contrary to investor perception, income funds haven’t been the laggards they are made out to be, as they offered higher returns as compared to growth funds over the last 6 months.

    Most growth funds (especially the tech-heavy ones) have faced the wrath of stock markets, which have been very volatile lately. This has made a big dent in their net asset values (NAVs), giving growth fund investors second thoughts about their investments. Nervous investors have even exited from these funds to stem the downturn in their investments. These were investors who took exposure to growth funds believing them to be outperformers vis-à-vis their income counterparts. Given the explosive returns that equity funds have given investors last year, these investors can’t really be faulted for their perception. The table below highlights the dismal performance of growth funds over the last 6 months.

    Open-ended, Growth Schemes NAV (Rs) 6-month return(%)
    UTI Growth Sector Fund - Brand Value 8.7 -2.0%
    IL&FS Growth & Value Fund (Gr) 13.7 -3.3%
    Birla MNC Fund (Gr) 30.1 -4.3%
    Reliance Vision Fund 19.0 -4.8%
    Tata Pure Equity Fund 12.0 -5.0%
    Sundaram Growth Fund 13.5 -5.3%
    Zurich India Equity Fund (Gr) 19.4 -7.9%
    Sun F&C Value Fund (Gr) 21.3 -8.1%
    K 30 18.2 -8.3%
    Canexpo 18.1 -8.4%
    DSP Merrill Lynch Equity Fund 18.3 -9.4%
    Birla Advantage Fund 38.3 -9.6%
    Taurus Starshare 8.8 -9.7%
    Kothari Pioneer Prima Plus (Gr) 22.2 -10.3%
    Primary Equity Fund 15.9 -11.2%
    Tata Life Sciences & Technology Fund (I) 11.5 -11.9%
    Mastershare Plus 1991 21.8 -12.0%
    Prudential ICICI Growth Plan (Gr) 21.1 -12.3%
    Mastergrowth Unit Scheme 1993 17.7 -12.5%
    UGS 10000 11.3 -13.0%
    Mastergain 1992 11.3 -14.4%
    Zurich India Top 200 Fund 15.6 -15.9%
    Magnum Equity Fund 13.8 -18.0%
    GIC D'MAT 8.3 -19.1%
    JM Equity Fund (Gr) 10.0 -20.5%
    Magnum Global Fund 10.8 -21.2%
    Magnum Multiplier Plus 1993 18.2 -21.8%
    GIC Fortune 1994 6.4 -23.7%
    Kothari Pioneer Prima Fund (Gr) 21.0 -26.5%
    Canbonus 10.1 -28.5%
    Magnum Sector Funds Umbrella - Contra Fund 8.4 -31.4%
    Grandmaster 1993 8.8 -38.5%

    However, the last 6 months have seen income funds outperform growth funds by a big margin, blowing a big hole in the myth that growth funds offer superior returns as compared to income funds. As the table below indicates, investors in income funds have got positive returns over the last 6 months, which is more than what one can say about growth funds. Not only have these funds given superior returns to growth funds, they have also given higher returns than the bank deposit rates for 6 months.

    Open-ended, Income Schemes NAV (Rs) 6-month return(%)
    Deposit I-NIT 1997 (Plan A) 11.0 63.1%
    PNB Debt Fund (Gr) 11.5 13.9%
    Alliance Monthly Income (Gr) 12.5 11.3%
    Dundee P S B Fund (App) 11.0 9.4%
    LIC MF Bond Fund (Gr) 11.6 8.4%
    Cancigo 1096.8 7.5%
    Sundaram Bond Saver (Appreciation Option) 13.8 7.3%
    K Bond Wholesale Plan (Gr) 10.8 7.3%
    Chola Triple Ace (Gr) 15.0 7.1%
    Templeton India Income Fund (Gr) 15.3 7.1%
    Prudential ICICI Income Plan (Gr) 12.7 6.9%
    Sun F&C Money Value Fund (Bond Gr) 12.1 6.9%
    K Bond - Deposit Plan (Gr) 10.8 6.8%
    Zurich India High Interest Fund (Gr) 14.7 6.8%
    Escorts Income Plan (Gr) 13.1 6.8%
    DSP Merrill Lynch Bond Fund (Gr Plan) 14.6 6.7%
    Magnum Liquibond Income Fund (Gr) 12.1 6.7%
    Dundee Corp. Bond Fund (App) 10.7 6.7%
    JF India Bond Fund (Gr) 13.8 6.7%
    Tata Income Fund (Regular Income Option) 10.6 6.7%
    Reliance Income Fund (Gr) 13.4 6.5%
    Kothari Pioneer Income Builder Account (Gr) 14.7 6.4%
    Birla Income Plus A 10.0 6.4%
    Chola Freedom Income Scheme (Cumulative) 12.9 6.3%
    JM Liquid Fund (Gr) 16.5 6.2%
    UTI Bond Fund 12.8 6.2%
    IL&FS Bond Fund (Gr) 111.3 6.0%

    Investors who have shirked income funds due to the 22% dividend tax must review their decision in the light of the latest market developments. They can look at investing in the growth option of income funds, as opposed to the dividend options.



    Equitymaster requests your view! Post a comment on "Income funds turn the tables". Click here!


    More Views on News

    The Right Financial Advisor Is Around the Corner (Outside View)

    Mar 10, 2016

    An opportunity to find an impeccably trustworthy and competent financial guardian is in the offing.

    Why financial planning should be dull and boring (Mutual Fund Corner)

    Feb 29, 2016

    Most financial planners come out as whiz kids who throw around financial jargon. But financial planning can be actually easy, provided one follows a disciplined approach.

    What Are E-Wallets And How To Use Them (Mutual Fund Corner)

    Feb 12, 2016

    PersonalFN highlights the benefits of parking a portion of your expenses in e-wallets and using them efficiently.

    Is Consumption Boom Over In India? (Mutual Fund Corner)

    Feb 2, 2016

    Mutual funds take a bearish call on the FMCG sector. The sector has started playing out due to a combination of slower growth and expensive valuations.

    How to Find a Saint Amongst Sinners? (Mutual Fund Corner)

    Feb 1, 2016

    Ethical practices help build long lasting relationships, and healthy long-term business relationships are often mutually rewarding. But PersonalFN is of the view that the financial services industry in India seems to have forgotten this.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms