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.
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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.
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