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Beating The Markets

The number of equity funds surpassing market indices like Nifty and Sensex is more than in April

In May, of the 230 diversified equity funds, 126 were able to beat the Sensex, while 127 were able to beat the Nifty. At about 11 per cent for the month of May, the cash proportion of equity fund assets went down from the 15 per cent held by them in April, but the actual cash levels have declined only marginally from Rs 16,000 crore to Rs 14,000 crore.

As a result of the market rally during the month, equities gained causing their proportion in the total equity fund assets to go up.

But there is more to equity funds' performances than just bettering the gains of the indices. Consider the returns of 3 indices in May:

  • BSE Sensex: 28.26 per cent
  • BSE Mid Cap: 43.91 per cent
  • BSE Small Cap: 51.92 per cent
  • S&P CNX Nifty: 15.00 per cent

It is clear that small-cap and mid-cap stocks were the major gainers in the market rally. In fact, 69 of the 126 funds that beat the Sensex were more than 50 per cent invested in small- and mid-cap stocks while the top ten performers of the month had an average 83 per cent of their assets in small- and mid-cap stocks. The huge difference between the returns of large-cap- and small-/mid-caps is also the reason why some funds gained far more than the Sensex.

Look at the contrast in the numbers for April:

  • BSE Sensex: 17.46 per cent
  • BSE Mid Cap: 18.86 per cent
  • BSE Small Cap: 21.38 per cent
  • S&P CNX Nifty: 28.07 per cent

The small-cap and mid-cap stocks were able to outdo the large cap stocks in April as well, but the difference in returns was not as much as that in May. In the same month, of the 226 diversified equity funds, only 27 were able to beat the Sensex while 77 were able to beat the Nifty.

Diversified Equity Funds
May-09 Apr-09
Returns (%) Funds that Beat (out of 230) Returns (%) Funds that Beat (out of 226)
BSE Sensex 28.26 126 17.46 27
BSE Mid Cap 43.91 19 18.86 13
BSE Small Cap 51.92 5 21.38 5
Category Average 30.57 - 14.12 -

So when the small- and mid-cap stocks outscored the large-cap stocks by a huge margin, a lot of equity funds were actually able to do better than the main indices. Certainly, betting on small-cap and mid-cap stocks has helped these funds outscore their better known peers.

Best Equity Funds: May 2009
Scheme Name  Return (%)*
Taurus Infrastructure 61.86
JM Basic 60.15
Sundaram BNP Paribas CAPEX Opp Reg-D 54.46
Sundaram BNP Paribas CAPEX Opp Reg-G 53.49
Escorts Growth 52.32
BSE Small Cap  51.92
Sundaram BNP Paribas Select Midcap Reg 51.66
Magnum Midcap 50.76
JM Emerging Leaders 50.30
Taurus Ethical 49.90
Taurus Starshare 49.10
JM Small & Mid-Cap Reg 47.56
Magnum Emerging Businesses 47.11
Escorts Leading Sectors 46.13
Magnum Global 45.16
Principal Junior Cap 45.05
Sahara Mid-Cap Fund 44.82
Canara Robeco Emerging Equities 44.49
Tata Service Industries 44.33
Taurus Discovery 44.16
BSE Mid Cap  43.91
Sensex  28.26
*Returns as on May 31, 2009