Market volatility impacts equity schemes, debt schemes stable: CRISIL

Our Banking Bureau
09 February 2005

CRISIL's monthly risk-adjusted return rankings (CRISIL-RRR) of mutual fund schemes for January 2005 show the stability of debt schemes and the impact of equity market correction on diversified equity schemes.

Says Krishnan Sitaraman,head of CRISIL's financial sector ratings, "After a bull run till December 2004, the equity market witnessed correction across the board in January 2005. Most of the benchmark indices came off the highs they had achieved last month."

However, good results by most corporates and healthy fundamentals induced investors into making value picks at lower levels. Profit booking at higher levels led to volatility, and the markets ended the month in negative territory; the Nifty generated negative returns of 1.10 per cent. The CNX Midcap 200 index, however, showed an annualised return of 6.08 per cent, indicating continued momentum in the mid-cap segment. The debt market continued to maintain stability and ended in positive territory for the second month in a row.

CRISIL-RRR has ranked 184 schemes for January 2005. It measures performance of the schemes based on their returns over the period of analysis, as well as the risks taken to achieve those returns. It covers most mutual fund investment options available to investors, covering 70 per cent of the industry assets under management (AUM) in January 2005.

Equity funds: Volatility affects returns
The 'general equity' category ended the month in negative territory on account of the correction and volatility in the equity market. The CRISIL Fund~eX generated a negative monthly return of 1.67 per cent. The ongoing mid-cap rally, however, continued to spur the returns of schemes with a relatively higher proportion invested in mid-cap stocks. Reliance Growth Fund occupies the top slot at CRISIL~RRR 1 for January 2005. Sundaram Select Midcap and Franklin India Prima Fund are at CRISIL~RRR 2 and CRISIL~RRR 3 respectively.

In the 'software' sector, Birla India Opportunities Fund - Plan B continues to reign at CRISIL~RRR 1. DSP Merrill Lynch Technology Fund and Alliance New Millennium Fund have interchanged their ranks relative to December 2004, and are currently at CRISIL~RRR 2 and CRISIL~RRR 3 respectively.