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Balanced funds look up

Jun 14, 2000

After disappointing investors in the last month, balanced funds are finally showing some signs of revival after having posted some healthy gains over the last couple of weeks. For investors who are wary of entering a pure vanilla growth fund, balanced funds offer a safe bet.

Open-ended,
Balanced Schemes
NAV (Rs) Last
week
Last
month
Last
year
Since
inception
Dhanavidya 12.10 10.40% -15.80% -21.10% 2.20%
Dhanasahayog C (Gr) 17.46 4.70% 1.70% -22.40% 3.60%
Dhanavikas (1) 8.76 3.30% 12.30% -2.00% -1.70%
Zurich(I) Prudence (Gr) 20.12 3.00% 7.90% 42.10% 17.90%
Dhanaraksha 1989 9.91 2.90% 0.40% 4.80% 4.30%
K P Balanced (Gr) 9.34 2.40% 7.50% 0.00% -12.30%
Canpremium 12.01 2.30% 8.60% 18.00% 16.50%
PNB Balanced Growth 13.64 2.00% -1.90% 0.00% 29.00%
Pru ICICI Balanced (Gr) 10.14 1.40% 7.90% 0.00% 4.00%
Sun F&C Balanced (Gr) 8.80 1.10% 7.10% 0.00% -17.00%
K Balance 10.67 1.10% 6.30% 0.00% 8.20%
DSP ML Balanced (Gr) 11.26 1.10% 6.40% 13.10% 12.80%
Cantriple 20.51 1.00% 11.10% 18.30% 6.30%
Alliance 1995 Fund (Gr) 57.50 1.00% 7.40% 102.80% 42.50%

Returns on net asset values (NAV) over the last week have been encouraging. The growth is attributed to the upbeat mood in equity markets, more so in the technology, media and telecom (TMT) sectors. However, government paper yields are hardening, and balanced funds with investments in government securities have witnessed declines.

However investors need to monitor equity/sectoral portfolios of their balanced funds carefully, as mutual funds continue to take heavy exposure to TMT stocks. Heavy exposure to TMT stocks could make the balanced fund vulnerable in times of volatility, as TMT stocks fall the hardest in a market slump. This the case in April-May 2000, when most balanced funds witnessed sharp declines in their NAVs due to skewed exposure to TMT stocks.

Investors must look for balanced funds with around 60% exposure to equities and the TMT component in equities must ideally not exceed 20%. However if the investor has an appetite for risk, he can look at a balanced fund with higher TMT weightage.


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