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Funds Celebrate Equity Markets Rally

After a gap of nearly eight weeks, all mutual funds' categories delivered positive returns. However, none of them could beat their respective benchmarks

After a gap of nearly eight weeks, all mutual funds' categories delivered positive returns in the week ended January 28, 2004. Stock markets rallied and so did the equity mutual funds. Even as not much changed in the bond markets as traders waited for direction from the forthcoming bond auction, all bond funds' categories ended the week in the positive territory.

Equity Funds
Equity funds celebrated the markets rally. All the categories delivered handsome returns, though, none of them could beat their respective benchmarks.

Auto, diversified and tax-planning funds led the equity funds' rally. The two-member auto funds' category gained 3.90 per cent over the week.

Both diversified and tax-planning funds surged 3.79 per cent each to marginally underperform the 3.81 per cent return of benchmark Sensex. Among the diversified funds, Escorts Growth and UTI Growth & Value funds were the top two gainers of the week--they added 6.40 and 5.79 per cent, respectively. Alliance Basic Industries and Sahara Midcap Fund were the big underperformers of the week. However, the two funds too ended in the positive territory and returned 1.23 and 1.34 per cent, respectively.

In the tax-planning funds' category, Escorts Tax Plan and Sundaram Taxsaver funds led from the front to gain 6.45 and 5.59 per cent, respectively. Alliance Capital Tax Relief '96 and HDFC Long Term Advantage Fund, however, were not so lucky and ended at the bottom of the category with a return of 1.53 and 2.49 per cent, respectively.

The five-fund category of pharma funds reversed their three-week losing streak and added an average 2.08 per cent. The category, though, underperformed benchmark BSE Healthcare Index, which zoomed 4.19 per cent. JM Healthcare Sector and Franklin Pharma funds were the top two-gainers of the category.

Technology funds too staged a comeback last week. The seven-fund category added an average 3.58 per cent as against the 4.34 per cent gain of benchmark BSE IT Index. Franklin Infotech was the only tech fund to beat the benchmark-the fund surged 4.38 per cent. UTI Software added 2.95 per cent to find a place at the bottom of the category.

FMCG funds continued their good show this week as well but underperformed their benchmark. The category gained an average 2.49 per cent as against the 4.02 per cent gain of BSE FMCG Index.

Petro funds got their steam back after three weeks and returned 1.88 per cent. The two-member banking funds' category too did well to gain 2.78 per cent.

The party in the equity markets spread to equity oriented hybrid funds as well. The category funds, who generally maintain nearly 60 per cent exposure to equities, gained an average 2.57 per cent. LICMF Balance, Escorts Balanced and Canganga were the top three gainers of the week-the three funds added over 4 per cent each. Magnum Growth was the only fund in the category to deliver negative return-the fund lost 1.26 per cent over the week.

Bond Funds
MIPs, who had been delivering negative returns since the last three weeks, staged a comeback in the week ended January 28, 2004, thanks to a rally in the equity markets. The category gained an average 0.66 per cent. This is the highest weekly gain for the category in the last eight weeks.

Income funds too reversed their two-week losing streak and gained 0.11 per cent. Gilt medium and long-term funds (0.11), cash funds (0.09 per cent), debt short-term funds (0.10 per cent), floaters (0.11 per cent) and gilt short-term funds (0.09 per cent) too delivered positive returns.

How They Fared
Objective  Return
Equity: Tax Planning 3.79
Equity: Diversified 3.79
Equity: Pharma 2.08
Equity: Auto 3.90
Equity: Banking 2.78
Hybrid: Equity-oriented 2.57
Equity: FMCG 2.49
Equity: Technology 3.58
Hybrid: Monthly Income 0.66
Equity: Petroleum 1.88
Debt: Medium-term 0.11
Debt: Short-term 0.10
Debt: Floating Rate 0.11
Debt: Ultra Short-term 0.09
Gilt: Short-term 0.09
Gilt: Medium & Long-term 0.11
BSE Sensex  3.81
BSE IT Index  4.34
BSE Healthcare Index  4.19
BSE FMCG Index  4.02