Ultra short-term schemes (earlier liquid plus funds) of mutual funds posted an average monthly return of close to 0.45 per cent amidst apprehension of negative returns as valuation norms of these funds changed from August 1.
Ultra short term funds are now valued at the daily average weighted price (mark-to-market) of debt papers held by them. Most of these debt papers have maturity of over 91 days. The new valuation norms came immediately after the Reserve Bank of India hiked the rate at which it infuses and absorbs liquidity from the system. With the hike in interest rates, bond prices come down resulting in drop in net asset value (NAV) of funds holding them. With mark-to-market valuation, experts were anyways expecting more volatility in returns from these funds, but as the new norms came just after the rate hikes, there was apprehension of drop in NAVs. Murty Nagarajan, head, fixed income, Tata Mutual Fund, said since the circular on valuation norms came in February, fund houses had ample time to adjust the portfolios of these funds and hence restricted the exposure to debt papers that were to be marked to market, thus neutralising the effect of change in norms.
Other debt funds have also given positive average return during the month including liquid funds, which matched the average return of ultra short-term funds.
Equity funds
Banking sector funds continue to be the highest grosser in the equity funds category with 4.75 per cent average return. FMCG funds clocked 3.8 per cent average monthly return, while equity diversified and tax-saving funds gave average return of 2.1 per cent each. However, pharma and technology funds posted negative average monthly returns with -1.74 per cent and -0.6 per cent return.
In the equity diversified category, Sundaram BNP Paribas PSU Opportunities and Birla Sun Life India GenNext were the best perfomers in August with 6 per cent monthly return, while Religare Mid Cap, DSP BlackRock Small and Mid Cap, Fortis Dividend Yield and UTI Opportunities clocked more than 5 per cent return.
The benchmark indices - Sensex and Nifty - gave a return of 0.58 per cent and 0.65 per cent respectively during the month. The BSE Mid Cap and Small Cap indices appreciated by 2.5 and 2 per cent respectively during the month.
Gold ETFs
Gold exchange-traded funds (ETFs) reversed its dismal performance in July, when the average drop in NAVs was 6.1 per cent, by registering a 6.8 per cent jump in average NAV in August. Spot gold prices on MCX rose 6.2 per cent from Rs 17,815 per 10 gm to Rs 18,920 in August.
Hybrid funds
In hybrid category, equity-oriented hybrid funds gave an average monthly return of 1.2 per cent, while monthly income plans (MIPs) gave an average return of 0.5 per cent. Funds with a mix of equity, debt and portfolio (Value Research keeps these funds in Hybrid: Others category), have given an average return of 0.88 per cent in August.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
