JM Mutual Fund plans to launch JM Index Fund. The scheme will be offered under two plans. While plan A will track BSE Sensex, plan B will track Nifty. The portfolio of an index fund mutual fund is weighted in the same proportions as the components of a broad-based share index. The performance of a index fund weighted in this way will not perform worse (or better) than the market. Many investors have reason to favour index funds on the assumption that trying to beat the market averages in the long run is futile, and their investments in these funds will at least keep up with the market. These funds track stock market indices instead of attempting to choose shares which may outperform the index. These funds buy all the shares in a given index. They are often equated with robots and those offering it are often termed black-box managers. The managers program a computer to buy shares in proportion to the index and allocate them to the fund.

Tracker funds have relevance in somemarkets, but not in all. If the market is matured, it will be difficult to add value. In a mature market, the information received by fund managers is largely the same for everybody. Therefore, without taking big sector or stock bets, most fund managers generally underperform index. In India, which is still not a matured market, information is received on a need-to-need basis. This leaves room for fund managers to do a lot of research on their own and beat the index.

An index fund works as long as everybody else is analysing all the companies and the market is setting fair prices. An index fund does not know a company, but invests irrespective of special situations. For example, if ITC is heading for a disaster, all active fund managers will start selling, while an index fund will just keep buying if it gets fresh money. If ITC goes bust, the index fund just writes it out of the portfolios. The other pre-requisite for an index fund which is a suspect in the Indian market, is sufficient liquidity. In ourmarket, which lacks depth, few Index funds with modest asset base can drive-up (or down) the price of index stocks itself. The broad and thin Indian stock market has a compelling logic for active management and will prove to be a diligent fund managers paradise.

Sun F&C Value waives loads

Sun F&C Value has waived both entry and exit loads with effect from April 23. Sun F&C Value Fund seeks long-term capital appreciation primarily through investment in equities. Launched July 1997, the fund mopped-up Rs 3.4 crore. In the first-quarter 1998, the fund has emerged as the second best performing fund in the open-end growth segment posting a return of 12.98 per cent. The fund follows value investment approach and has a portfolio of around 35 stocks.

Birla Income announces 7% payout

Birla Income Plus has announced an income payout of 7 per cent under its income plan. The fund had earlier paid an income of 7 per cent in October, 1997. The latest NAV (April 29, 1998) of the income plan is Rs10.32, while the NAV of the growth plan is Rs 13.97. The fund has emerged as the second best performing fund in the open-end income segment in 1997-98 posting a return of 15.17 per cent.