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Global Villains down Indian Heroes

All equity fund categories posted negative returns in September after the US crisis hit the Indian markets

From January till June this year, the Indian investors and companies witnessed a tragic tale that saw dreams broken, hopes shattered and lives ruined. The plummeting markets engulfed everyone in its grasp and took them down with it. But the people involved with the stock markets refused to take the beating lying down. Investors maintained their faith in the long-term success of the Indian growth story and companies rode this faith as the markets started an eventual climb back up in the months of July and August.

And all was going well till the middle of September when a new villain entered the picture and the markets turned ugly again. As crisis hit the American financial companies, the Indian markets bore a brunt of it as well. Consequently, in September, the Sensex lost 12 per cent and all sector indices ended the month in the red as well.

Hence, not surprisingly, the mutual funds put in a similar performance as well. All the categories of equity fund ended September in the negative return zone, which is quite unlike the previous month when all equity categories posted positive returns.

Amongst all the categories of equity funds, the technology funds were the biggest losers. The category lost nearly 18 per cent in September, while the BSE IT index was down by 22 per cent. The worst hit fund, Franklin Infotech has lost nearly 20 per cent whereas even the best fund of this category, Birla Sun Life New Millennium was down by 15 per cent.

The second worst performers were the tax planning funds which lost nearly 12 per cent.

Equity-diversified, the biggest category, posted negative returns of 11.6 per cent in September. JM Emerging Leaders, the worst performer in the category lost 26.5 per cent while the best performer, Sahara Growth lost merely 5 per cent.

The equity-auto category, which was the best performer of August, posted a negative return of 8 per cent in September.

Pharma and FMCG funds, known to be the most defensive of the lot, also fell sharply. The former lost nearly 10 per cent while the latter were down by 6.8 per cent in the month. However, on a slightly longer-term basis, they have still fared better than the other equity categories. In 2008 so far, equity-pharma has managed to curtail its fall to nearly 16 per cent while equity-FMCG has been down by nearly 27 per cent. During this time, the other categories have lost nearly 40 per cent on an average.

On a brighter note, the banking funds have performed better than other equity funds. The category has curtailed its fall to 5.6 per cent in the month.

What has come as a surprise is that the category of Gold ETFs, which languished at the bottom of the return charts in the previous month, has risen to the top. Gold ETFs have registered positive returns of 14 per cent in September as against the negative return of 7 per cent in August. Gold ETFs have also emerged as the best performers in the year so far. They have posted a return of nearly 20 per cent till September. 

On the debt side, all funds have posted positive returns. Long-term Gilt funds were the best performers with a return of 0.99 per cent. Unlike the previous month, the debt funds with longer maturity period have performed better than the short-term debt funds 

Overall, September has been a disappointing month for the mutual fund industry. And the fact that in the previous two months, the markets and the funds showed signs of revival, only to fall down flat again in September is what makes the situation seem worse than it is.