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On Tepid Markets, Funds Outperform

With stock markets stuck in a rut, funds managed to stay ahead on returns

This was a special month for the mutual fund industry – all the broad categories, on an average, beat their respective indices.

While the best performing equity class, pharma funds, has beaten the Bombay Stock Exchange (BSE) Healthcare index, banking funds beat the BSE Bankex. A similar story was repeated by FMCG funds, which beat the BSE FMCG index, and technology funds beat the BSE IT index. Diversified equity funds and the tax planning funds both beat the BSE Sensex and the Nifty for the 4th month in a row – it would not have taken much of a performance spike to beat BSE Sensex this month as it lost 0.02 per cent. While that is a minuscule amount, yet it sent an uncertain message to investors. Elsewhere, investor sentiment was not helped much by Nifty gaining just 0.55 per cent.

Funds Beat Indices
Equity: Pharma  BSE HC
7.55 2.52
Equity: Technology  BSE IT
7.51 5.31
Equity: Diversified  S&P CNX Nifty
2.87 0.55
Equity: Banking  Bankex
0.62 -1.43
-0.48 -6.74

At another level, for yet another month, small-cap stocks surpassed large-caps, with BSE Small-cap index registering the maximum gain at 12.75 per cent. The gains for BSE Mid-cap index stood at 5.60 per cent.

While the major indices remained largely flat, the rally that did happen was led by realty, consumer durables and IT sectors, although rate of growth faltered. BSE Realty index topped the table after posting returns of 12.92 per cent in August, but it paled when compared to a return of 21.88 per cent for the month of July. BSE Consumer Durables index gained 5.65 per cent to remain at the next slot.

FMCG funds, which registered their historically highest returns of 17.63 per cent last month, breaking records set as far back as in December 2003, were at the bottom of the table in August after they posted returns of a negative 0.48 per cent. However, they succeeded in containing their fall -- BSE FMCG index lost 6.74 per cent during the same period.

The story for diversified equity funds ended on a positive note as they gained 2.87 per cent, beating the gains of both, the Sensex and the Nifty. A look at the earlier three months, one finds that while in June the category posted negative returns of 0.07 per cent, it gained 8.40 per cent in July.

During the month, out of 281 diversified equity funds, 273 funds outperformed the Sensex while 252 funds outperformed the Nifty. The top gaining diversified equity fund was Sundaram BNP Paribas Select Small Cap, a small-cap fund, which gained 12.31 per cent, but it was not able to surpass the gains of BSE Small-Cap index.

Among debt funds, the floating rate long-term institutional debt funds gained the maximum of 0.50 per cent. For the medium and long-term debt and gilt funds categories, this was an unhappy month. After two months in the green, they lost out as the 10-year GOI yields increased from 6.97 per cent to 7.42 on government borrowings.

Gold ETFs, which invest in physical gold, gained 2.95 per cent for the month of August.

Performance: August 2009
Category  Returns
Equity Funds  
Equity: Pharma 7.55
Equity: Technology 7.51
Equity: Speciality 3.76
Equity: Diversified 2.87
Equity: Tax Planning 2.78
Hybrid: Equity-oriented 1.31
Equity: Banking 0.62
Hybrid: Arbitrage 0.34
Equity: Index 0.15
Equity: FMCG -0.48
Hybrid: Asset Allocation -0.99
Debt Funds  
Debt: Floating Rate Long-term Inst 0.50
Debt: Speciality 0.42
Debt: Liquid Plus Inst 0.39
Debt: Floating Rate Long-term 0.38
Debt: Liquid Plus 0.38
Debt: Ultra Short-term Institutional 0.35
Debt: Floating Rate Short-term Inst 0.33
Debt: Floating Rate Short-term 0.33
Debt: Ultra Short-term 0.30
Debt: Short-term Institutional 0.23
Debt: Short-term 0.18
Gilt: Short-term -0.27
Debt: Medium-term -0.44
Debt: Medium-term Institutional -0.50
Gilt: Medium & Long-term -1.36
Gold ETF 2.95
Hybrid: Monthly Income 0.25
Hybrid: Debt-oriented -0.11