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Auto Funds Pull Off Surprise

The BSE Auto index gave excellent returns that were better than Sensex and this got reflected in the mutual fund category too

The year 2009 has been good for the auto funds, with the sector managing to pull off performances that it was not really known for earlier.

In fact, the BSE Auto index has generally been a laggard compared to Sensex in the long run--over a three-year period BSE Auto has given a -14.1 per cent return when Sensex has given just -1.67 per cent.

But the scene has been changing in a surprising manner where the BSE Auto has been giving a 42.16 per cent (YTD--31st Jan 2009 to 24 Apr 2009) returns whereas for the same period Sensex managed just 17.43 per cent.

Therefore, it was not surprising to see that the equity auto category of mutual funds have managed to give their best performance in a three-month time frame.

The reason behind the huge jump are not just the great sales being managed by most of teh car-makers, excise duty cuts effected by the government and also the feel-good factor that seems to have taken control of both investors and fund managers that have been driving stocks higher.

The equity auto category gave an excellent return of 30.84 per cent in the three month time period (ending on April 2, 2009). The Sensex too pulled up its socks and even managed to match the gain by effecting a 30.60 per cent returns while equity diversified category delivered 22.97 per cent in the same time frame.

However, it must be borne in mind that Equity Auto is a minuscule category compared to equity diversified as there are only two funds in this category--UTI Transportation and Logistics and JM Auto.

UTI Transportation and Logistics is nearly six times the size of JM Auto. Its assets under management (AUM) was Rs 55 crore initially in April 2004, touched a high of around Rs 100 crore in April 2006 and is now at Rs 24.8 crore (as on March 31, 2009). JM Auto Sector has an average AUM of Rs 4.39 crore at the end of March 2009, although it had started from Rs 13 crore initially and fell to a low of Rs 8.8 crore in July 2006.

Both funds tilt towards mid- and small-cap shares in allocations, with UTI Transportation and Logistics portfolio tilting towards these two segments to the tune of 67.59 per cent of its assets and JM Auto has allocated 56.29 per cent.

Their combined AUM positions are at Rs 29.19 crore whereas equity diversified stands at Rs 68992 crore as on March 31, 2009.

JM Auto Sector has outperformed its benchmark (BSE Auto) only once in 2007 by giving 17.39 per cent. In the same period BSE Auto gave 2.70 per cent and Sensex had delivered a whopping 74.15 per cent return. In none of the years have either of the funds outperformed the Sensex.

In the nightmare year of 2008, when the BSE Auto fell 57 per cent, JM went down by 59 per cent and UTI Transportation and Logistics fell by only 49 per cent.