Pre-budget MF performance

Our Banking Bureau
07 March 2005

The equity markets made a volte-face post the correction last month and registered a strong performance in February 2005. Most of the benchmark indices portrayed healthy gains as investors looked to make value picks at lower levels. The markets continued with their momentum on the last day of the month post the budget pronouncements.

"This trend clearly indicates that market participants were anticipating a favourable budget and that most budget pronouncements are being looked at favourably from a long term perspective," says Krishnan Sitaraman, head, financial sector, CRISIL.

The debt markets were largely stable with the 10-year benchmark yield moving slightly from 6.70 per cent at the beginning of the month to 6.55 per cent by the month end. For the mutual fund industry, the Budget proposed the launch of a new product in the form of mutual fund units linked to gold prices, which could be a good avenue to attract investors.

CRISIL FundServices' monthly risk adjusted return ranking (CRISIL~RRR) of the performance of mutual fund schemes, has ranked 188 schemes for February 2005 across ten categories. The CRISIL~RRR measures performance of the schemes based on the returns given by the schemes over the period of analysis as well as the risks they took to achieve those returns. The ranking universe covers most of the mutual fund investment options available to the investors. The CRISIL~RRR covered 70 per cent of the industry assets under management (AUM) in February 2005.

Equity funds: Returns move northwards.
The general equity category registered a complete turnaround over its weak performance last month, and ended the month well into positive territory. The CRISIL Fund~eX generated a monthly return of 4.96 per cent. Franklin India Prima Fund occupies the top slot at CRISIL~RRR 1 for February 2005, having moved up two notches. Sundaram Select Midcap and Birla Midcap Fund are at CRISIL~RRR 2 and CRISIL~RRR 3 respectively.

In the software sector, Birla India Opportunities Fund - Plan B maintained consistency in performance and was ranked CRISIL~RRR 1. Alliance New Millennium Fund and DSP Merrill Lynch Technology Fund were at CRISIL~RRR 2 and CRISIL~RRR 3 respectively.