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Storm-Hit Stocks Hurt Equity Funds

After quite some time, a weekly performance by markets has not been a great one for investors in equity

After having got used to some great news emanating from bourses week after month, this week has failed to generate much enthusiasm among the market participants simply because the gains were negligible, if any. Reason? Last week, the Sensex rose 0.89 per cent while the Nifty was down 0.08 per cent.

While debt funds emerged strong last week, yet two equity categories still managed to steal the thunder by managing to top the category tables, even above all debt categories. The downside of the story is that none of the equity categories were able to beat their respective benchmarks.

Surprisingly, considering that most fund managers and investors have been ignoring these sectors, the technology and FMCG categories turned out to be the best equity categories of the week yielding 1 per cent and 0.22 per cent respectively. These were also the only two equity categories to post a positive return. Their benchmarks, BSE IT and BSE FMCG returned a higher 3.18 per cent and 0.37 per cent respectively.

Investors have been shunning both IT and FMCG in the recent market rally simply because the former may have much more to suffer as a result of the global financial meltdown that has hit winning of new contracts as well as due to the rupee strengthening in recent weeks. While FMCG is a defensive bet usually resorted to when expectations are that markets will fall and the constituents of this sector, like HUL, will gain steadily as demand for their products does not fall dramatically.

Asset allocation and arbitrage funds too were in the positive terrain delivering returns of 0.5 per cent and 0.2 per cent respectively.

Then followed the debt category. Floating Rate Long-Term came out as the winner with 0.12 per cent returns. Liquid Plus and Floating Rate Short-Term funds came second with 0.09 per cent returns. Cash funds followed closely with 0.08 per cent returns and Short-Term debt funds delivered 0.04 per cent. These were the debt categories yielding positive returns in the week. Gilt Short Term, Debt Medium Term and Gilt Medium and Long-Term followed with negative returns shedding 0.16 per cent, 0.27 per cent and 0.35 per cent respectively.

Equity funds that were at the bottom of the table are Pharma, Diversified, Tax Planning and Banking funds. The worst category of the week turned out to be that of the Banking funds shedding 3.45 per cent while its index BSE Bankex shed 2.02 per cent. This is again a surprise as most investors are looking to bet on infrastructure stocks (courtesy expectations of government pushing spending on infrastructure in its new innings)  and banking is included in the set of beneficiaries simply because funds will flow to industry via them.
The Diversified and Tax Planning funds shed 1.19 per cent and 1.27 per cent respectively while their benchmark, the BSE Sensex index returned a positive 0.89 per cent. Pharma funds lost 0.79 per cent while the BSE Healthcare index returned a positive 0.48 per cent.

Hybrid Debt-Oriented funds shed 0.08 per cent while Hybrid Equity-Oriented funds lost 0.6 per cent. Monthly Income Plans (MIPs) fell 0.25 per cent.

Gold ETFs lost 2.15 per cent in the week.

Funds This Week
Category  1 Week Return
Equity: Technology 1.00
Hybrid: Asset Allocation 0.50
Equity: FMCG 0.22
Hybrid: Arbitrage 0.20
Debt: Floating Rate Long-term Inst 0.13
Debt: Floating Rate Long-term 0.12
Debt: Liquid Plus Inst 0.09
Debt: Liquid Plus 0.09
Debt: Floating Rate Short-term 0.09
Debt: Ultra Short-term Institutional 0.09
Debt: Floating Rate Short-term Inst 0.08
Debt: Ultra Short-term 0.08
Debt: Short-term Institutional 0.06
Debt: Speciality 0.05
Debt: Short-term 0.04
Hybrid: Debt-oriented -0.08
Gilt: Short-term -0.16
Equity: Index -0.25
Hybrid: Monthly Income -0.25
Debt: Medium-term -0.27
Debt: Medium-term Institutional -0.30
Gilt: Medium & Long-term -0.35
Equity: Speciality -0.51
Hybrid: Equity-oriented -0.60
Equity: Pharma -0.79
Equity: Diversified -1.19
Equity: Tax Planning -1.27
Gold ETF -2.15
Equity: Banking -3.45
* Returns as on 12/06/2009