Even balanced funds fall to market shenanigans - Views on News from Equitymaster

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Even balanced funds fall to market shenanigans

Jul 28, 2000

Yesterday personalfn.com reported on the sharp fall in growth fund NAVs in view of the market slide. Investors who believe that balanced funds offer a better hedge in such a scenario may want to review their opinion after seeing our figures.

Open-ended, Balanced†Funds NAV
(Rs)
Last
week
Last
month
Last
year
Since
inception
Dhanavidya 12.5 1.7% 2.4% -22.4% 2.6%
Dhanaraksha 1989 10.3 1.2% 2.5% 5.6% 4.7%
Dhanasahayog C (Gr) 18.6 0.8% 1.6% -20.5% 4.3%
PNB Balanced Growth 14.0 -2.6% -2.7% 25.9% 31.2%
Dundee Balanced Fund (App) 8.3 -3.2% -6.4% 0.0% -5.4%
Zurich(I) Prudence (Gr) 19.1 -3.5% -5.3% 15.9% 16.5%
K Balance 10.1 -4.5% -6.4% 0.0% 2.7%
Birla Balance (Gr) 11.2 -4.6% -8.9% 0.0% 19.2%
JM Balanced Fund (Gr) 15.9 -4.6% -7.6% 14.3% 9.9%
Pru ICICI Balanced (Gr) 9.3 -4.8% -9.3% 0.0% -4.5%
Tata Young Citizens 10.5 -5.0% -7.8% 16.1% 18.5%
K P Balanced (Gr) 8.6 -5.2% -7.2% 0.0% -19.0%
Canpremium 11.8 -5.4% -4.1% 10.0% 14.9%
Sun F&C Balanced (Gr) 8.2 -5.9% -8.7% 0.0% -22.8%
DSP ML Balanced (Gr) 10.6 -6.0% -7.4% -1.2% 5.7%
Dhanavikas (1) 8.2 -6.2% -8.5% -20.0% -2.5%
Tata Balanced 14.5 -6.5% -10.0% 26.5% 15.1%
Unit Scheme-1995 (Gr) 169.0 -7.1% -11.5% 42.2% 20.5%
Alliance 1995 Fund (Gr) 51.3 -7.2% -12.8% 57.7% 38.4%
Cantriple 19.0 -7.4% -8.5% 0.7% 5.1%
Magnum Balanced Fund 14.8 -8.0% -12.1% 59.9% 23.6%
Canganga 10.6 -8.8% -9.6% -4.6% 2.5%

Over the last week, balanced funds have fared no better than growth funds as is apparent from the table. In fact they have been a little more unfortunate than their growth counterparts, in the sense that balanced funds have taken a hit in their equity and debt portions. They have witnessed a fall in their equity portion after the decline in the markets. To that extent they have been as adversely affected as growth funds.

However, the fixed income portion has not given them too much consolation either. RBIís announcement effecting a hike in the CRR and the bank rate was responsible for this. Subsequent to RBIís announcement gilt yields rose, i.e. gilt prices fell. This resulted in an erosion in the fixed income portion of balanced funds. This has deprived them of a hedge that would have protected them from a slump in equity markets. So balanced funds have been considerably more unfortunate than growth funds in that respect.

Another reason why balanced funds have seen a sharp fall in NAVs is because of abnormally high allocations in the technology, media, telecom (TMT) sectors. These stocks have fallen harder than the others in the latest market-drop.

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