The stock market rally in the last three weeks has been a reminder to investors of the return potential of equities as an asset class. Equity funds created ₹20,260 crore in new investor wealth due to the ongoing stock market rally, an analysis of mutual fund asset data shows. Investors who owned equity funds as of April-end would have made this gain. Open and closed end equity funds combined managed to beat the benchmark indices such as the Sensex and the Nifty.
This analysis is based on mutual fund asset data for April 30, 2014 and the subsequent returns on these funds until May 19, 2014. The analysis showed that mutual funds returns were 22 per cent higher than the returns generated by Sensex and 25 per cent higher than Nifty returns.
A third of this wealth creation came from the top ten funds by size, which chipped in with ₹6527 crore. HDFC Equity and HDFC Top 200 led this pack. CPSE ETF, a two month old fund, managed the highest returns, surpassing other funds by generating 29.57 per cent in the last three weeks.
Thematic funds made a strong comeback in certain sectors. Among theme funds, it was Infrastructure, Banking and PSU oriented funds which made the most of the market rally. Predictably, funds investing in domestic markets scored over funds investing in international markets. The latter were impacted both by an appreciating rupee and by the turmoil in US markets recently.
The other laggards in this rally were technology and pharma funds, which are focused on dollar earnings and exports. FMCG which is usually considered a defensive sector, failed to stay in positive territory as high valuations worked against stocks in the sector.