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Monday, Jan 07, 2002

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New Year, new beginning; but... uncertainty remains

Nilanjan Dey

THE New Year will mean a lot of things for a lot of people. For investors, however, the basics remain the same. As always, these revolve certain evergreen themes. Chief among these, in no particular order, are preservation of capital, optimisation of returns and liquidity.

How can mutual funds help you meet these goals? That's the question all fund enthusiasts should answer right at the beginning of the year. Most MFs, in fact, are trying to help investors identify the right answer — an attempt that is evident in their fact-sheets and other literature.

While it is difficult to say which category of funds will do well in 2002 in terms of returns, opinions expressed by a number of fund houses in this regard have some things in common. Such opinions, on one side, are shaped by macro factors and economic fundamentals. On the other side, each player has his own view on the market, one that is expected to propel his investments in future.

However, both sides will be tempered by that strange element called uncertainty. More of the latter will dash a lot of hopes and MF investors should be ready with contingency plans. Some of this uncertainty, one is sure, will drive potential long-term money into short-term avenues. That could, on one front, mean good news for short-term, fixed-maturity income funds and even liquid schemes.

One is also sure about the diversity that is expected to happen in the MF sector. For the consumers (read investors) this will mean wider choice. Hopefully, there will be more schemes to invest in as well as greater variety in terms of product differentiation, positioning and usage. Technology, too, will be in greater use. The sector may also see more players testing the waters. No new names, however, can be immediately mentioned.

Investments by fund managers will be conditioned by such issues as interest rates and government borrowings, oil prices and international tensions, forex reserves and GDP growth figures, valuations and sectoral trends... the list could go on and on.

MF investors, irrespective of their focus on equity or debt, should commence their journey into 2002 by carefully planning their course. Such planning will entail knowing about one's risk profile and the kind of exposure one will be able to handle.

As for new schemes, SUN F&C has proposed to come out with a gilts fund. The scheme is expected to complement the MF's products (income, liquid) on the debt side.

Meanwhile, as transaction trends for the month (up to January 2) show, gross purchases of equity are less than gross sales by Rs 30.61 crore. Gross purchases of debt, however, are more than gross sales by Rs 235.92 crore.

Feedback may be sent to blcal@vsnl.net

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