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Most Equity Funds Lag Benchmarks

With markets at a high, most equity funds could not overtake their benchmarks

The story of mutual funds in the past 7 months, spanning all equity funds, has been one of supreme growth. After all, all indices in India have almost doubled from their lows reached in March.

The gains have been booked by the mutual funds equity category and happy faces abound, which is in sharp contrast to the global bust-born gloom that had clouded the investment horizon of almost every investor.

But, before sending congratulatory messages to your favourite fund manager, there is one space that has been left uncovered – have they been able to beat the benchmark’s gains against which their fund’s performance could be checked.

Seen from this viewpoint, the answer is no as 184 equity funds failed to beat their benchmarks.

Funds are benchmarked against a stock market index, generally on the Bombay Stock Exchange or the National Stock Exchange. This index is chosen by the asset management company (AMC) to serve as a yardstick against which their performance can be measured. The fund manager of that fund then tries to invest in a manner that would, ideally, give returns that are in excess of what the benchmark is giving. If the index beats him, then the fund is considered to be a laggard. This has happened to the 184 funds that we are talking about.

However, what is noticeable is that most funds have managed to almost keep pace with their index. For instance, even though they have underperformed the index, the top 82 funds have still managed to post gains in excess of 100 per cent, with the top four, Nifty Junior BeES, ING C.U.B., Sundaram BNP Paribas CAPEX Opp Reg-D, and ICICI Prudential Banking & Financial Services Ret. Have posted returns over 140-to-165 per cent – they still got beaten by their respective benchmarks though, CNX Nifty Junior, BSE CG, BSE Bankex! (Check table: Beaten by Benchmarks).

In effect, investors in these funds would have been better off if they had themselves opted to replicate the index during the period.

But while these funds were beaten by their benchmarks, there were others that managed to do much better than their point of reference (benchmark). Some 84 funds did manage to beat the benchmarks, signifying they have done what they set out to do. In fact, the top 12 funds managed gains between 150-to183 per cent, leaving their benchmarks way behind.

Among the top three funds were Taurus Infrastructure, JM Emerging Leaders, and Principal Emerging Bluechip, all of whom managed gains in excess of 173 per cent. (Check table: Beating the Benchmarks).

However, the outperformance by some funds could be due to a higher component of high beta stocks in their portfolio, which are volatile and tend to rise more in rising markets and falling more than the index when markets crash. The index itself would be composed of a high-beta and low-beta stocks, says Financial Chronicle.

For investors, the takeaway in this is to track their funds carefully and if found to be underperforming their benchmarks across a sustained period, then they should know the time has come to shift.


Beaten by Benchmarks
Scheme Name    Returns (%)    Index    Returns (%)
Nifty Junior BeES   165.88   CNX Nifty Junior   172.02
ING C.U.B.   159.51   CNX Nifty Junior   172.02
Sundaram BNP Paribas CAPEX Opp Reg-D   143.95   BSE CG   160.11
ICICI Prudential Banking and Financial Services Ret   143.31   BSE Bankex   180.52
Sundaram BNP Paribas CAPEX Opp Reg-G   138.96   BSE CG   160.11
ICICI Prudential Emerging STAR Inst I   131.79   CNX Nifty Junior   172.02
UTI Mid Cap   131.10   CNX Midcap   138.22
JP Morgan India Smaller Companies   130.65   CNX Midcap   138.22
ICICI Prudential Emerging STAR   130.11   CNX Nifty Junior   172.02
DSPBR Small and Mid Cap Reg   129.67   CNX Midcap   138.22
Taurus Discovery   127.17   CNX Midcap   138.22
ING Midcap   125.78   CNX Midcap   138.22
Tata Midcap   124.12   CNX Midcap   138.22
HSBC Midcap Equity   123.83   BSE Mid Cap   154.68
Religare Contra   122.22   BSE 500   123.09
ING Tax Savings   121.75   CNX Midcap   138.22
Birla Sun Life Basic Industries   120.91   BSE 200   121.09
Templeton India Equity Income   118.78   BSE 200   121.09
Birla Sun Life Equity   117.68   BSE 200   121.09
Reliance Growth Inst   117.26   BSE 100   117.81
Fortis Future Leaders   117.25   CNX Midcap   138.22
Franklin Infotech   117.10   BSE IT Index   119.35
Reliance Growth   117.03   BSE 100   117.81
Sahara Tax Gain   116.70   BSE 200   121.09
AIG Infrastructure and Economic Reform Inst   115.91   BSE 100   117.81
Magnum Equity   115.76   BSE 100   117.81
AIG Infrastructure and Economic Reform Reg   115.10   BSE 100   117.81
Principal Personal Tax Saver   114.97   BSE 100   117.81
Tata Contra   114.95   S&P CNX 500   111.49
Kotak Mid-Cap   114.54   CNX Midcap   138.22
IDFC Premier Equity Plan A   114.42   BSE 500   123.09
UTI Opportunities   112.96   BSE 100   117.81
Canara Robeco Infrastructure   112.93   BSE 100   117.81
AIG India Equity Inst   112.65   BSE 100   117.81
Morgan Stanley Growth   112.48   BSE 100   117.81
Baroda Pioneer Global   112.41   BSE Sensex   111.16
Baroda Pioneer ELSS 96   112.30   BSE Sensex   111.16
AIG India Equity Reg   111.72   BSE 100   117.81
Baroda Pioneer Growth   111.51   BSE Sensex   111.16
Taurus Tax Shield   110.50   BSE 200   121.09
Sundaram BNP Paribas Growth Reg   110.46   BSE 200   121.09
Birla Sun Life Frontline Equity Plan A   110.18   BSE 200   121.09
Franklin India Index BSE Sensex   110.04   BSE Sensex   111.16
UTI Master Index   110.03   BSE Sensex   111.16
Returns between 09/03/2009-14/10/2009


Beating The Benchmarks
Scheme Name    Returns (%)    Index    Returns (%)
Taurus Infrastructure   183.05   BSE 200   121.09
JM Emerging Leaders   177.13   BSE 200   121.09
Principal Emerging Bluechip   173.62   CNX Midcap   138.22
Sundaram BNP Paribas S.M.I.L.E. Reg   165.75   CNX Midcap   138.22
Magnum Emerging Businesses   161.13   BSE 500   123.09
Sundaram BNP Paribas Select Midcap Reg   157.13   BSE Mid Cap   154.68
Birla Sun Life Mid Cap Plan A   155.45   CNX Midcap   138.22
JM Small & Mid-Cap Reg   153.09   CNX Midcap   138.22
ICICI Prudential Discovery Inst I   152.57   S&P CNX Nifty   98.91
DBS Chola Midcap   152.27   CNX Midcap   138.22
Sahara Mid-Cap Fund   151.70   CNX Midcap   138.22
ICICI Prudential Discovery   150.65   S&P CNX Nifty   98.91
Canara Robeco Emerging Equities   149.26   BSE 200   121.09
Tata Service Industries   147.65   BSE Sensex   111.16
Magnum Global   145.40   BSE 100   117.81
DBS Chola Opportunities   143.77   S&P CNX Nifty   98.91
HDFC Equity   141.47   S&P CNX 500   111.49
Mirae Asset India Opportunities Regular   137.99   BSE 200   121.09
Magnum IT   136.60   BSE IT Index   119.35
Birla Sun Life Tax Relief 96   134.04   BSE 200   121.09
Franklin India High Growth Companies   133.89   S&P CNX 500   111.49
Reliance Regular Savings Equity   133.72   BSE 100   117.81
DBS Chola Tax Saver   133.33   S&P CNX Nifty   98.91
Franklin India Prima   132.62   S&P CNX 500   111.49
Birla Sun Life India Opportunities   132.58   S&P CNX 500   111.49
Bharti AXA Tax Advantage Eco   132.52   S&P CNX Nifty   98.91
ING Contra   132.38   BSE 100   117.81
Bharti AXA Tax Advantage Reg   132.19   S&P CNX Nifty   98.91
Tata Life Sciences & Tech   131.74   BSE Sensex   111.16
HDFC Core & Satellite   130.92   BSE 200   121.09
Morgan Stanley A.C.E.   129.16   BSE 200   121.09
Birla Sun Life Infrastructure Plan A   127.92   S&P CNX Nifty   98.91
Fidelity India Special Situations   127.34   BSE 200   121.09
Reliance NRI Equity   126.79   BSE 200   121.09
HDFC Top 200   126.02   BSE 200   121.09
ICICI Prudential Technology   125.88   BSE Teck Index   84.28
ICICI Prudential Tax Plan   125.10   S&P CNX Nifty   98.91
Returns between 09/03/2009-14/10/2009