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| Setting the market aflame: The ONGC
offer proved a point |
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OTHER RELATED STORIES
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That
oil could and would set Indian capital market aflame was a foregone
conclusion. Be it ONGC or GAIL, the hydrocarbon PSU public offer
season has been a season like none other for the Indian markets.
The size and significance of the government's move shall remain
under discussion. But for now, the million dollar question is 'where's
the market heading'? Well, looks like anybody's guess. After a volatile
January, the markets started the new month on a positive note, and
before anyone realised what had changed, the indices took a reversal
trend and ended flat-at roughly the previous month's closing level.
Had the "feel good factor" been put on hold? The dithering,
as it turned out, was on account of the large number of primary
issues headed the market's way, apart from the upcoming elections.
While political developments are always known to influence Indian
stockmarkets, the launch of primary issues diverted much attention,
adversely affecting the liquidity of some of the scrips. The index
heavyweights, in particular, have witnessed a major decline in trading
volumes. The impact was all the more since Indian markets lack the
depth seen in developed markets that have long term equity players
such as pension funds and other large contrarian investors.
Scenario Planning
But make no mistake. The PSU counters are already
back in favour, as the ONGC, GAIL, PTC and other PSU issues received
an overwhelming response from investors. What's more, investors
in PSU stocks piled up huge returns during the first week of March.
Moreover, fundamentally, there are no negative signals that could
have caused an adverse market reaction. This, together with the
fact of primary issues having already discounted by the market,
could see major action once elections are over.
The broadbased 30-stock benchmark of the Bombay
Stock Exchange, BSE Sensex, and the National Stock Exchange's S&P
Nifty, both lost half a per cent each over February. The sectoral
indices saw a relatively higher fall, and the major loser was the
BSE Consumer Durables Index, which lost close to 9 per cent, followed
by the BSE it index, which shed 3.5 per cent.
Mutual funds were bearish during February,
and after continuous positive net inflows in equities for three
consecutive from November to January, they were net sellers during
the month. Mutual funds pulled out over Rs 500 crore from the equity
market in February. The inflows in mutual funds have also declined
during the month, and the redemptions were also high-especially
from corporates and banks that are known to sell their mutual fund
holdings in February-March to book income as the financial year
comes to an end. The net inflows from FIIs, on the other hand, stood
at a reassuring Rs 2,400 crore.
Diversified Equity Funds
The diversified equity funds saw a mixed trend
during the month. Though 50 of the 69 schemes considered by this
survey posted positive returns, the gains were marginal. Kotak 30,
whose NAV appreciated by 5.25 per cent during the month, posted
the top gains. The fund, with close to 77 per cent of its corpus
in equities, had a relatively diversified portfolio. The gains have
mainly come from Maruti Udyog, BHEL, Siemens and Bharti Tele-Ventures.
Tata Pure Equity Fund and Tata Equity Opportunities Fund have clocked
in at second and third spots, respectively. Their exposure to Maruti
Udyog, Hero Honda, ITC and Bharti have helped post gains. The latter
also had exposure to Mahindra & Mahindra (M&M), which has
posted huge gains of over 13 per cent during the month. Franklin
India Growth Fund and Deutsche Alpha Equity Fund are the other two
schemes which have figured in the top 5.
Balanced Schemes
In the balanced category, Kotak Balanced Fund
has topped the ranking table with absolute returns of 3.01 per cent.
The fund's performance could be mainly attributed to its heavy bets
on Siemens, IPCA Laboratories, TISCO, BHEL and Balrampur Chini Mills,
which constituted almost 25 per cent of the scheme's corpus. SBI
Magnum Balanced Fund also posted decent returns, to finish second.
Pantaloon Retail, Maruti Udyog, BHEL and ITC were the main contributors
to its performance. Canganga, which is ranked third, had reduced
its equities' exposure to about 74 per cent from its previous month's
exposure of 83 per cent. ING Vysya Balanced Fund is fourth, while
PNB Balanced Fund, with close to three quarters of its corpus in
equities, managed to find place in the top 5.
Sectoral Schemes
The sectoral equity schemes have faired poorly,
compared to their diversified equity counterparts, and this is mainly
because of the poor performance of the major sectors. Of the 30
sectoral schemes analysed, only 11 managed to post gains.
Tata Life Sciences & Technology Fund, with
heavy bets on stocks like Divi's Labs, Lupin and Matrix Labs, has
delivered the highest return in the category, while SBI Magnum Sector
Umbrella-Pharma Fund is second-placed. While the former delivered
returns of 7.30 per cent, the latter managed to post 6.13 per cent
gains. Alliance Buy India Fund, SBI Magnum Contra Fund and Kotak
MNC have also faired well in February.
ELSS Schemes
Among tax savings schemes, Alliance Capital
Tax Relief 96 has emerged as the best performer with return in excess
of 6 per cent. The fund has mainly benefited from its heavy exposure
to Divi's Laboratories, Jammu & Kashmir Bank and Cadila Healthcare.
Tata Tax Savings Fund, which had a major portion of its portfolio
invested in auto and pharma sectors, has been ranked second. Franklin
India Taxshield, First India Taxgain and Birla Equity Plan have
also posted good returns, which puts them among the top five funds.
Debt And Gilt Funds
The sentiment in the Indian bond market remained
bearish-which has resulted in the poor performance of long-term
debt and gilt funds. The majority of debt funds have seen an erosion
in their NAVs over February. At the beginning of the month, bond
prices were somewhat buoyant on account of some positive announcements
in the Interim Budget for 2004-05 on the fiscal deficit front and
the next year's borrowing program, but as the month progressed,
the sentiment turned bearish on account of rising inflation.
Outlook, Post 3-11
The current uncertainty, 3-11 and all, in the
markets should not worry long-term investors unduly. The country's
strong economic fundamentals and the corporate sector's positive
quarterly results are reason enough for the markets to advance further
in the medium to long run. Debt fund investors, however, need to
be patient, and should expect a degree of short-term volatility
in debt markets.
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