Large-cap funds worst hit in market correction

Equity mutual funds (MFs) that invest in large-cap stocks have taken a knock in the ongoing market correction falling at a faster pace than peers in the smalland mid-cap space. While large-cap equity funds, which invest in stocks of blue-chip companies, have lost about 4.8 per cent so far in 2015, small and mid-cap MFs advanced 1.9 per cent during the period.Smalland mid-cap funds have also declined at a slower pace during the one-month as well as three-month time frame. Interestingly , large-cap funds, which were lagging their smalland mid-cap peers during the market rally , have taken the maximum hit over the one-year as well.

Large-cap funds declined 1.1 per cent during the one-year time frame (till September 4), the only equity category focused on the domestic markets to slip into the negative zone for the period. "Liquidity is quite high in large-cap stocks. And when the market corrects, it is liquidity that drives selling," says a top offici al with a leading fund house.

Sensex on Tuesday surged 424 points on global cues. The BSE benchmark and the broad-based nifty have lost 8.4 per cent and 7.6 per cent respectively in the last one year. In contrast, funds that have exposure to small and mid-cap stocks gained around 15.6 per cent. "The skew towardsbanking, auto and metals is the main reason for the poor performance (of large cap funds)," says A Balasubramanian, MD and CEO, Birla Sun Life MF.