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Dancing to a Theme

Among the faster recovering funds is one based on a theme

The strong rally in the equity markets after the uncertainties of election results ended has brought some windfall gains for investors who have lost a significant portion of their investments after markets started their southward journey since January last year.

This has helped mutual funds to recover their losses. But what we can see is that among those funds that are recovering faster is a thematic fund, in particular, the equity-banking category -- it is even ahead of equity-diversified funds over three- as well as five-year periods.

Equity banking category is delivering returns of 21.42 per cent and 25.60 per cent over three- and five-year period ending May 21, 2009 respectively, as compared to just 3.95 per cent and 22.89 per cent return of equity-diversified category across the same period.

The reason behind this is the sharp rise in banking stocks in the current market rally. It is no wonder then that the BSE Bankex delivered a return of around 112 per cent over March, 09 to May 21, 2009 period as compared to around 68 per cent by BSE Sensex.

Even over the one-year period ending May 21, 2009, of the total 292 open-end equity funds, whose returns are available, three banking funds are actually delivering positive returns. While two are banking ETFs Kotak PSU Bank ETF, PSU Bank BeES who track CNX PSU Bank index, the other is Reliance Banking Retail Fund. Kotak PSU Bank ETF and PSU Bank BeES are delivering highest returns of around seven per cent while following them is Reliance Banking Retail with around five per cent return.

Although on a standalone basis these returns don’t look that significant, but when we see that the worst-performing open-end equity fund is still down around 65.35 per cent, these gains look remarkable.