Opportunities galore for bargain hunters in 1998
Vipul Mehrotra
The year gone by may well be termed as the R&D year for the mutual fund industry. For in calendar 1997, the fund managers and their asset management companies were engaged in exploring new avenues for fund mobilisation. The funds added some new products to their stable to maximise the options to investors.Thus, investors had a wide variety of funds to choose from to achieve almost any financial objective. For the sake of convenience, we have classified these funds into three categories to suit your requirements. Closed-end bargains The discount or the premium at which a closed-end fund trades to its NAV is perhaps the most important factor influencing the decision to invest in closed-end funds. Thus, going by this yardstick, many a listed closed-end funds seem to be a good bargain. Trading at a handsome discount ranging between 20-30 per cent, many closed-end funds are just too good to be true. Yet, these equity funds only suit investors willing to take the risk associated with investment in
equities. MasterPlus'91, the seven year growth scheme from UTI, is approaching redemption in March 1999. The stock is available at Rs 17.30 on NSE at a discount of 21.08 per cent to its net asset value of Rs 21.92. If the NAV remains constant, this would mean a 26.71 per cent return over the next fifteen months with long term capital gains tax benefit. Masterplus has a good track record and a sound portfolio that offers limited downside risk. During 1997, the NAV of the fund touched a high of Rs 27.42 (August 6) and a low of Rs 20.43 (January 1, 1997). A closed-end balanced fund from 20th Century AMC, Centurion Prudence has been a major turn around story of the year. An IPO boom-to-doom story, the fund has appreciated by 31.31 per cent after touching a low of Rs 7.92 in October 1996. This follows a major restructuring exercise with a shift of focus to large cap stocks and strengthening of the debt portfolio. The strong portfolio can be judged from the fact that although the market fell by 16.53 per cent
between October 15 - December 15, the fund depreciated by only 2.22 per cent. Centurion Prudence is available at Rs 7.70, at a discount of 25.96 per cent to its year end NAV of Rs 10.40. The fund is to be redeemed on January 31, 1999. If the NAV remains constant, it would mean a 35.06 per cent return over the next thirteen months with long term capital gains tax benefits. Mastershare '86 has a long and impressive history. The fund has appreciated by an annual rate of around 28 per cent since its launch in 1986. The first equity fund has an uninterrupted dividend track record. For the past three years, the fund has paid an annual dividend of 16 per cent. At the current market price, Mastershare has a dividend yield of around 12.5 per cent. The market price of the fund has a tendency to peak before the payout every year. The fund also has a handsome return potential over long-term. The fund is available at an attractive discount of around 33 per cent. Long Term Wealth Builders Few of the
private sector open-end equity funds hold promise with their relatively low risk and disciplined equity fund strategy. Being open-end, these funds provide entry and exit at NAV related price. Moreover, they facilitate systematic investment, which could be an extremely convenient way to build wealth with small savings. The performance of Alliance '95 has been remarkable in 1997. A balanced fund, it has appreciated by 48.56 per cent during the year. This is more than any other fund in any category. The fund was among the first to take an aggressive view in info-tech stocks. Alliance '95 is one of the very few funds with a balanced portfolio. Unlike other players, the fund has been relatively diligent in following a balanced asset allocation. The fund brought down its entry load from 6 per cent to 2.25 per cent. Templeton India Growth fund has been not been one of the top performers in 1997. Yet, the fund has been extremely disciplined toward its investment philosophy so far. The fund could be a dark
horse over the next three years. In any case, it is unlikely to be one of the bottom performers. The fund carries no load on investments of over a year. Kothari Bluechip and Top 200 by definition aim to provide investors a steady growth of capital through investments in large cap blue chip stocks. Bluechip has been the top performing growth fund since turning open end in early 1997 while Top 200 has almost always been among the top performers since its launch. Bluechip has appreciated by 36.37 per cent and Top 200 by 24.59 per cent during the year ended November 30. If these funds stick to their stated investment objective (which they have so far), investors are unlikely to end up losers. Both the funds carry an entry load of 3 per cent. Birla Advantage has been among the top performers. Despite being aggressive in mid cap stocks, the fund has managed to stay above board in the two year bear phase after its launch. Over the past year, Birla Advantage has appreciated by 24.61 per cent. The fund carried
no load on investments over two years. Income Funds With twelve open-end income fund launches, 1997 was clearly year of the income funds. These funds should appeal to investors seeking steady returns with exceptional liquidity. They provide better returns than a short-term bank deposit. Moreover, with the provision of systematic withdrawal and investment plans, they prove to be sophisticated instrument for the risk-averse investors seeking steady returns. These funds prove to be safe bonds with liquidity without penalisation unlike bonds in our market. The best way to invest in an income fund is to control the controllable : keep cost as low as possible and stay away from funds that expose you to undue risk. Even a marginal equity exposure can change the risk return profile of a fund. ITC High Interest Fund & Birla Income are attractive as their cost structure favours long term investors. Although other no-load funds keep cost down, they are exposed to short term inflow and outflows. ITC High
Interest Fund prevents short term investments with a 1.5 per cent exit load on investments of less than a year. Birla Income Plus charges a 1.5 per cent entry load on investments of over Rs 50,000. This enables the funds to attract long term investment without bloating long term investment costs. Chola Triple Ace, by its constitution, invests in Triple AAA rated instruments and thus is likely to be less volatile than other income funds. The fund has a brief and impressive history. It has appreciated more than any other open-end fund in 1997. The fund charges a nominal 0.05 per cent load on entry.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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