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Even balanced funds witness erosion

Oct 17, 2000

The slide in equity markets is showing no signs of abating. That is not only bad news for growth funds, but also equity-heavy balanced funds. The BSE Sensex has slumped nearly 10% in October 2000 despite excellent results posted by software majors – Infosys, Satyam and NIIT. Currently the mood is very subdued and no one is willing to take any bets on where the market is headed.

The slump in equity markets has taken its toll on balanced funds, where equities comprise anything upwards of 55% of total net assets. So balanced funds haven’t been spared the repercussions of the market slide.

Balanced Schemes NAV
(Rs)
Last
week
Last
month
Last
year
Since
inception
BSE - 30 - -8.1% -23.8% -30.8% -
S&P CNX Nifty - -7.6% -21.7% -24.0% -
S&P CNX 500 - -8.2% -24.3% -27.9% -
Franklin Balanced Fund(Gr) 9.1 -4.1% -10.5% 0.0% -6.2%
Sundaram Balanced Fund (Gr) 9.1 -4.2% -10.6% 0.0% -10.1%
Tata Young Citizens 10.1 -4.3% -11.3% -3.2% 16.5%
JM Balanced Fund (Gr) 15.1 -4.3% -13.6% -3.6% 8.3%
Unit Scheme-1995 (Gr) 180.6 -4.3% -4.8% 28.2% 21.1%
K Balance 9.6 -4.5% -10.9% 0.0% -1.4%
Pru ICICI Balanced (Gr) 9.1 -4.7% -12.9% 0.0% -6.9%
DSP ML Balanced (Gr) 10.0 -4.8% -13.6% -17.4% 0.4%
PNB Balanced Growth 12.7 -5.0% -10.3% 0.4% 15.3%
Tata Balanced 13.7 -5.0% -15.3% -4.0% 13.1%
Cantriple 17.9 -5.1% -12.8% -17.6% 4.2%
Dundee Balanced Fund (App) 7.4 -5.4% -15.3% 0.0% -15.2%
Canganga 9.2 -5.9% -14.0% -16.8% 1.5%
K P Balanced (Gr) 7.9 -6.0% -13.7% 0.0% -26.0%
Birla Balance (Gr) 10.4 -6.0% -15.7% 0.0% 11.2%
Sun F&C Balanced (Gr) 7.4 -6.8% -17.1% 0.0% -30.4%
Alliance 1995 Fund (Gr) 49.8 -7.0% -16.7% 12.3% 35.9%
Dhanavikas (1) 7.3 -7.4% -15.6% -36.1% -4.1%
ING Balanced (Cum) 8.6 -8.7% -19.9% 0.0% -9.5%

However the good news is that the benchmark indices have fallen more sharply than the NAVs. In other words, balanced funds have outperformed the benchmark indices. This is mainly because of a hedge in the form of fixed income securities in balanced portfolios, which deadens the impact of a slump in equity markets. What is also interesting is that balanced funds have outperformed the benchmark indices by big margin over the last month.

So balanced funds seem to have served their purpose well, which is protecting the investor from a slump in equity markets through a fixed income portfolio. Investors who wish to insulate themselves from market shocks such as the current one can look at one of these balanced funds, with a decent fixed income allocation of approximately 40%, and a TMT (technology, media, telecom) exposure of below 30% of net assets.


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