Blue chip funds take a beating

Market volatility lops off 10-30% per cent of NAVs.

Some top performing equity mutual fund schemes, which yielded up to 65 per cent returns in 2006, have seen an erosion of 10-30 per cent in their net asset values (NAVs) so far in 2007.

On the positive side, the fall has also opened a window of opportunity for new investors "" especially those who are buying units for tax saving purposes "" to buy at a cheaper rate.

The current market volatility is the main reason for the poor performance, forcing fund houses to keep their fingers crossed and hope for a turnaround. 

BEAR HUG
Fund Name	Net asset value (Rs)
	Dec 29, '06	Mar 6, '07	% chg
UTI Thematic Infrastructure fund	28.55	18.08	-36.67
Sundaram BNP Paribas Select Mid-Cap	92.55	84.53	-8.66
Tata Infrastructure fund	24.27	21.01	-13.43
Pru ICICI Dynamic fund	65.80	60.90	-7.44
Reliance Diversified Power	36.46	33.18	-8.99
Pru ICICI Infrastructure	18.50	16.70	-9.72
Franklin India Opportunities	26.41	22.76	-13.82

As per data available with Value Research, UTI Thematic Infrastructure fund, which was the top performer last year with exceptional returns of 64 per cent, has been a laggard this year with returns of minus 14.01 per cent till 3 March.

The diversified scheme's NAV, which was Rs 28.55 on 29 December, 206, came down to Rs 24.55 on 3 March. It fell further to Rs 18.08 as on March 6.

During the same period, the Bombay Stock Exchange Sensex went down by 9.38 per cent, while its Mid-Cap Index and Small Cap Index fell by 12.41 per cent and 12.05 per cent respectively.

Sundaram BNP Paribas's Select Midcap NAV, which was Rs 92.55 at the end of last year, has now come down to Rs 84.53, an erosion of 8.66 per cent. The fund's NAV grew 63.55 per cent last year.

Tata Infrastructure Fund was the third top performer fund in 2006, giving returns of 61.96 per cent. The fund, one of the first infrastructure sector-specific fund launched in the country, saw its NAV dropping to Rs 21.01 this year.

"It is too early to say diversified funds have not done well this year. In the beginning of the year, all stocks were down, impacting NAVs as well. But as the market bounces back, it would gain significantly," said Ved Prakash Chaturvedi, managing director of Tata Mutual Fund.

The fund industry had, however, anticipated a reversal in the markets, which was growing around 40 per cent over last two years.

"The stock markets gave returns of 40 per cent last year. But, sustaining such rapid growth is tough for any market. We expect fund returns between 20 per cent and 30 per cent this year. We also expect that the market might not remain under bear domination for a long time," said a fund manager with SBI Mutual Fund.