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Equity Funds' Greatest Day Ever

For equity funds, Tuesday's once-in-a-lifetime gains wiped away months of losses in just one day

Glory Day

As expected, Tuesday saw India's equity funds make their highest ever one-day gains. Of the 300 equity funds of all types for which data is available by late on Tuesday night, as many as 131 had gains of more than 15 per cent over their NAVs of Friday, 15th May.

The number of funds with gains greater than 10 per cent came in at 231, a huge 77 per cent of the total. The higher-end of the range was dominated by banking and financial services funds, most of which had returns higher than 20 per cent. The absolute king of the hill was the Sundaram BNP Paribas Financial Services Opportunities Fund, which gained 27 per cent. The Sahara Banking and Financial Services Fund and Reliance Banking were other huge winners with 24.8 per cent and 23.6 per cent. Outside the financials space, Sundaram BNP Paribas CAPEX Opportunities stood the tallest with 23.1 per cent gains.

Interestingly, the other end of the scale is largely populated by Infotech, Pharma, and FMCG sector funds. Some IT funds are around the red level mark. Franklin Infotech is down a third of a per cent while ICICI Prudential Technology is up just half a per cent.

Relative Problems

However, what looks like a bonanza on an absolute scale turns into a decidedly middling performance when one compares fund to the benchmarks they are supposed to beat. Just 51 out of 300 funds beat their benchmark. Not just that, a round 100 funds slipped behind their benchmark by 3 per cent or more.

Delving deeper into the data available with Value Research, it is clear that fund managers' misguided attempts to the time the markets were responsible for this underperformance. Like every other investor, almost all fund managers were heavily into cash, waiting to buy at the famous 'post-election dip' which turned into the most spectacular non-dip in the history of the Indian capital markets.

While one great day doesn't make a bull run, investors would be relieved at having made back some of the deep losses of the past year and a half. Going forward, the markets are ceratin to remain volatile; and it remains to be seen how fund managers cope with the situation.