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Equity funds' one year returns take a dip

It has been a year of dashed hopes for most equity fund investors. Despite galloping returns at the

It has been a year of dashed hopes for most equity fund investors. Despite galloping returns at the beginning of 2000, the sharp losses in the last few months have pushed most equity funds in the red. As a result, investors who had entered these funds in September last year have seen erosion in their initial investment. For one year ended September 30, 2000, the basket of 54 funds has posted an average return of meagre 0.12 per cent. Compare this to the one-year average returns from equity funds in February, which was a whopping 129.9 per cent.

Thus, for most of the investors, who joined the bandwagon of diversified equity funds in October last year, it has been both a bumpy and downward ride so far. Given that volatility has only been on the rise on the Indian bourses, the message is clear - even one year is not long-term in equity markets.

Consider this - as many as 30 diversified equity funds have posted negative returns for the one year ended September 30, 2000. Thus, had you invested in one of these funds a year ago, you would have suffered a loss on your initial investment. The top loser in the category is Canglobal from Canbank Mutual Fund, which has seen its net asset value erode by 30.33 per cent. Among other prominent losers, Zurich India Top 200 from Zurich AMC has dropped over 25 per cent.

That the fall in the markets has had a devastating impact on technology concentrated funds can be gauged from the fact that there are only 13 funds, which have given investors more than 12 per cent return. The average positive return, though a mere 0.12 per cent, is largely due to the big gains posted by two tax planners, Kothari Pioneer Taxshield and Alliance Capital Tax Relief. The two funds have posted a one-year return of 109.65 per cent and 82 per cent, respectively.

Most of the losers for the one-year period or those with marginal returns were at the top of the charts at the peak of the technology rally earlier this year. Take for instance, Magnum Taxgain with a one-year return of 9.05 per cent on September 30, 2000. The fund was at the num,ber two slot in February for the one year period with a whopping return of 345 per cent! Indeed, the lofty returns have just melted in the sandstorm, which has engulfed the bourses in the last few months. Although Canglobal was way below on the rank ladder, even the current top loser had an impressive one-year return of 57 per cent in February.

On a steady decline: Equity Funds
  Month  Avrg 1-yr Return (in %)
  February 129.9
  March 78.19
  April 61.87
  May 38.5
  June 57.66
  July 23.56
  August 15.71
  September 0.12