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Technology
has revolutionised stock markets across the world, and India is
no different. The turn-of-the-millennium bull run was largely a
tech phenomenon, and its after-effects continue-despite the April
2000 crash. The learning for investors, broadly, has been that technology
is not a regular sector. Now, tech is showing signs of attracting
the limelight again. November saw Wipro zoom 14.6 per cent, Satyam
7.7 per cent and Infosys 4 per cent. The big difference now is that
the buoyancy can be traced to rational rather than irrational exuberance.
Also, it is part of a diversified rally involving pharma, auto,
and other stocks. While BSE it index moved up an amazing 11.5 per
cent over the last month, the BSE Healthcare index was up 6.2 per
cent. Upward paths, market wisdom suggests, are many.
Closer Look
The benchmark indices, BSE Sensex and NSE Nifty,
did not do very well in November. The gains? A ho-hum 2.8 and 3.8
per cent, respectively, though higher than the Dow Jones' fall of
0.2 per cent, Strait Times' fall of 0.6 per cent, KLSE's fall of
4.6 per cent, and the Nasdaq, SETI, KOSPI, Hang Seng and FTSE's
minor gains of 1.5, 1.0, 1.8, 1.0 and 1.3 per cent, respectively.
Diversified Equity: Up
The spurt in tech, pharma and a few midcap
stocks has boosted performance here. The category's average return:
7 per cent. Of 77 schemes surveyed, 31 delivered above average returns.
Tata Equity Opportunities Fund, the topper, has delivered 16 per
cent. Since October, it has shuffled all the top five stocks in
its portfolio.
Sectoral Schemes: Tech Story
In this category, four of the top five funds
are tech-focused. Tata Life Sciences and Tech Fund leads the category.
Prudential ICICI Tech Fund, which had bet big on Infosys, Hughes
Software and Satyam, posted handsome gains. Others gained as well
on account of improved interest in tech and pharma sectors.
Balanced Schemes: Balance Gains
Among hybrid funds, Tata Balanced Fund is on
top, with 70 per cent invested in equities. The equity part of the
portfolio is well diversified, with the highest exposure-to Bharat
Forge-just around 4 per cent. The scheme has outperformed its peers
by a huge margin.
Equity-linked Savings: Diversified Too
The performance of this category is in line
with diversified equity schemes, with Tata Tax Saving Fund being
the best performer. The other schemes in the top five are HDFC Tax
Plan, SBI Magnum Tax Gain 93, Prudential ICICI Tax Plan and Principal
Tax Savings Fund.
Income And Gilt Picks
It is unrealistic to expect big returns in
the gilt market. The benchmark index i-bex shed 50 basis points
over the past month. G-sec yields, on the slide for the three years,
are now near bottom. And if economic activity picks up, inflation
might return and interest rates could rise. The RBI's signal that
even the CRR could be used as a two-way liquidity management tool
has hardened yields too. The performance of medium- to long-term
gilt funds was in line with the i-BEX, with an average return of
negative 0.5 per cent.
Looking Ahead
Equity funds still look an attractive option
for aggressive investors. Value funds could do well. Risk-averse
investors, on other hand, could stick to income funds-so long as
they do not expect the same high returns as in the recent past.
For a higher risk-return option, they could consider marginal equity
schemes.
Goal Focus
Begin with the goal in mind. This principle
applies to investments as well.
By Shilpa Nayak
 It's
funny how so many 'savers' lull themselves into the belief that
they are 'investors'. Putting money into assets in the hope of multiplying
their value, in itself, is not investing. An investor, actually,
is someone who makes his money work for him. And this necessitates
the setting of a definite goal towards which the money must work.
The formulation of the strategy comes only after that has been done.
A gleaming new sedan next year. A world trip
the year after. Your own luxury condominium in seven years. An Ivy
League education for your daughter in 20 years. A cosy retired life
of philosophical pursuits by 50. Whatever your goal, you should
allocate your funds accordingly. And this means not getting lost
in such sub-issues as tax breaks, liquidity and so on. "It
is your individual goal that should influence the choice of investments
you make," says Arjun Gupta, Financial Consultant, Client Associates.
"There is no such thing as one right ready-mix investment strategy
for one and all."
After that, there are two primary must-dos,
as follows.
| RICH DAD, POOR DAD |
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In his book rich dad, poor dad:
what the rich teach their kids about money that the Poor and
the Middle Class Do Not, Robert Kiyosaki explains how "the
poor and the middle class work for money" but "the
rich have money work for them". His observation is that
one's socio-cultural upbringing--and thus traditional attitudes-can
come in the way of rational judgment. His learnt-from-the-rich
advice? Behave like the rich, no matter how much money you
have. Set a goal (say, an all-comfort no-work life post-45),
and build an asset base that returns enough every year to
live in utmost comfort without needing to chip away at the
capital. Sort of like living on interest. Is it possible?
Yes, he argues, so long as you get investment savvy. For example,
this could mean moving out of a centrally located inherited
house, putting it on rent, and using the money to pay off
instalments on a new suburban home, with cash to spare for
an equity portfolio.
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Knowledge Imperative
It is important to acquaint yourself with all
risks intimately, and that too, from a rational perspective (Peter
Bernstein's books are considered excellent reading on this subject).
Low-risk debt will do for modest goals. But for aggressive 'growth'
targets, you need to take on more risk. Even within equities, risk
levels vary vastly, and good knowledge could make for some terrific
bets (on an emerging corporate powerhouse, for instance).
Keeping Track
Next, you must stay closely engaged with the
key factors that influence your portfolio, and this could turn you
into a compulsive reader, info-cruncher and opinion tracker. It's
worth the effort. Simple stock diversification, for example, can
de-risk your equity portfolio. Another way to counter volatility
is to buy your chosen stocks in small packets over an extended period,
so that your acquisition cost gets averaged out over the period.
But whatever you opt for, you should have a
calculation in mind to see if the portfolio is headed for your goal
or not. If not, you'd need to tweak your strategy.
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