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A shield against assault

Rajesh Naidu, Rahul Jain

Posted: 2008-03-30 00:59:27+05:30 IST
Updated: Mar 30, 2008 at 0059 hrs IST

On the prejudices of philosophers, the remarkably profound thinker Friedrich Nietszche wrote “How could anything originate out of its opposite? For example, truth out of error? Or the will to truth out of the will to deception? He opined “Such origins are impossible; whoever dreams of them is a fool, indeed worse; the things of highest value must have another, peculiar origin - they cannot be derived from this world.” The way the markets are moving, it seems that the incomparable thinker’s observation holds significance in today’s markets as well. To assume that out of this languishing phase of markets would emerge a strong and linear trend would amount to ignoring the sources of the languishing trend.

The all-pervaded impact of the markets, which on one occasion seems to rebound and another languish, has left investors with little options to sustain their interests. So, is it expecting of the opposite that would help? More precisely, it is the arrangement that would help you access the opportunities (which still exist!). With equity, being the most volatile and susceptible to markets’ developments, a renewed focus on mutual funds would be a wise decision on your part to make money, if not at a brisk pace, but at a steady one.

FE Investor did a study of various categories of mutual funds. The reason for the study was to find out, which are the less hit or solid performers amongst the mutual funds, which have also borne the brunt of the across-the-board-impact of the markets. Here are the findings of the study that would help you understand why certain funds do better than others and why you should invest in these funds. Also, being invested in these funds, though they have advantages, it doesn't guarantee you assured returns.

The findings

Across various categories of funds, pharmaceuticals, IT, FMCG sectors (read as thematic funds), which most times in the markets act as defensive ones, didn't give the expected relief in the increasing turmoil of the markets. However, on a relative comparison basis, when other thematic funds fell almost 30-35%, pharmaceuticals, IT, FMCG plunged between 11-28%. Explains Vinayak Iyenger, a mutual fund distributor, "It is better to invest in themes, which are defensive in nature. The reason being, these themes can withstand any dip in the markets. It is like even though the markets nosedive, it won't stop you from eating, brushing your...

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