Bonds Lose Sheen As Equities Shine

Mumbai, May 17: | Updated: May 18 2003, 05:30am hrs
It looks like the general perception that interest rates may get plateaued out in near term might be a reality, at least the one-month returns from debt-dedicated schemes say so. In the last one month, various schemes dedicated to debt-related products have yielded an average return of about 0.75 per cent as against an average return of up to 20 per cent in the last two fiscals.

However, in the last one month, the battered equity funds have had a smart run in the market. Returns from a diversified equity scheme, along with select sector-specific schemes, steadily moved higher. The average return from a diversified scheme stood at 5.89 per cent, with the number one ranked scheme in this category posting a whopping 16 per cent return.

The data for one-month period, analysed by mutual fund tracker Value Research Online, shows that the average return from 33 short-term funds is 0.67 per cent, with Deutsche Short Maturity topping the table with a yield of 0.92 per cent, followed by Sundaram Select Short Term with a yield of 0.80 per cent and Alliance Short-term at number three with a yield of 0.78 per cent. In this category, Chola Freedom was placed last with a monthly return of 0.53 per cent.

When asked about the interest rate movement in short term, an MF top official said: My view is that interest rates will be range-bound to flat in the next six months or so. Investing in debt will give reasonable returns, but not any exceptional returns.

What, I would suggest to investors is that from your capital, even if you have the appetite to invest at least 10 per cent of the same, you should invest at least half of that right now. Currently equity looks very attractive, he added.

Another MF CIO said: Investing in debt products has become much less attractive and riskier than in earlier years given the sharp fall in yields and higher volatility.

In the equity diversified category, Franklin India Prima heads the ranking with a monthly return of 16.29 per cent in a group of 40 schemes, followed by Sundaram Select Mid Cap with a monthly return of 15.03 per cent and UTI Master Value Fund posting a return of 14.09 per cent.