Equity mutual funds outperform indices
While the sensex inched up by just 1.3% and the Nifty gained only 2.6% since October 16, 2009 when the indices hit a high on the post-election recovery rally, equity MFs have done much better.
By M Allirajan, TNN |
The sharp downturn in the markets has pushed key indices close to levels seen in mid-October 2009 but most equity mutual funds (MFs) have managed the volatility well. While the sensex inched up by just 1.3% and the Nifty gained only 2.6% since October 16, 2009 when the indices hit a high on the post-election recovery rally, equity MFs have done much better.
In all, two in every three equity MFs (excluding sector funds) gave higher returns than the sensex and about six in 10 beat the Nifty since October 2009, analysis shows. Only gold exchange-traded funds did better than equity MFs during the period.
Equity funds have also managed the downturn well. A good majority of funds declined at a lower pace than the indices in the recent market downslide. The sensex and Nifty have fallen 16.3% and 16.4% from the highs hit on November 5, 2010. However, about 175 out of the 330-odd equity MFs (excluding sector funds) restricted their fall to below 16%, data shows.
“Many aggressive stocks did badly assnd many funds were underweight on them,” explains Sankaran Naren, CIO, equities, ICICI Prudential MF. This helped funds post better returns than benchmark indices and trim losses during the downslide, he says. Moreover, fund houses were overweight on pharmaceuticals, which has outperformed the markets significantly, he says.
“Fund houses have more exposure to non-interest rate sensitive sectors now,” says Gopal Agrawal, head, equities , Mirae Asset Global Investments . In fact, several leading diversified equity MFs have good exposure to technology, FMCG and healthcare stocks.
While the BSE FMCG index moved up 1.1%, healthcare and energy indices declined 7.5% and 21.7% respectively from their November 5 highs. The real estate index fell 47% while the metals and auto indices lost 19.4% and 19.8% respectively . “It is a testing time. There is too much fear and even value stocks are getting punished,” a senior industry official said.
Fund houses would steer clear of interest rate sensitive sectors such as auto and realty for now, observers say. “Interest rates have moved up sharply. Unless, there is a pause in monetary tightening , fund houses would maintain a defensive posture.”
In all, two in every three equity MFs (excluding sector funds) gave higher returns than the sensex and about six in 10 beat the Nifty since October 2009, analysis shows. Only gold exchange-traded funds did better than equity MFs during the period.
Equity funds have also managed the downturn well. A good majority of funds declined at a lower pace than the indices in the recent market downslide. The sensex and Nifty have fallen 16.3% and 16.4% from the highs hit on November 5, 2010. However, about 175 out of the 330-odd equity MFs (excluding sector funds) restricted their fall to below 16%, data shows.
“Many aggressive stocks did badly assnd many funds were underweight on them,” explains Sankaran Naren, CIO, equities, ICICI Prudential MF. This helped funds post better returns than benchmark indices and trim losses during the downslide, he says. Moreover, fund houses were overweight on pharmaceuticals, which has outperformed the markets significantly, he says.
“Fund houses have more exposure to non-interest rate sensitive sectors now,” says Gopal Agrawal, head, equities , Mirae Asset Global Investments . In fact, several leading diversified equity MFs have good exposure to technology, FMCG and healthcare stocks.
While the BSE FMCG index moved up 1.1%, healthcare and energy indices declined 7.5% and 21.7% respectively from their November 5 highs. The real estate index fell 47% while the metals and auto indices lost 19.4% and 19.8% respectively . “It is a testing time. There is too much fear and even value stocks are getting punished,” a senior industry official said.
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Fund houses would steer clear of interest rate sensitive sectors such as auto and realty for now, observers say. “Interest rates have moved up sharply. Unless, there is a pause in monetary tightening , fund houses would maintain a defensive posture.”
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