Emerging market funds lag equity MFs

COIMBATORE: Emerging markets may have brought a lot of cheer for global investors in the past few months. However, Indian investors, who bet on funds that invest in stocks of other emerging markets, would have little reason to celebrate as their returns are much lesser than what diversified equity mutual funds (MFs) have given.

Emerging markets and Asia-focused equity funds have underperformed equity MFs significantly. While equity MFs returned around 77% in three months (up to June 5) emerging market funds have managed to post a growth of only between 36% and 61%, data shows.

The steady rise of the capital markets, which brought handsome gains for equity MFs, has completely eclipsed the performance of other asset classes as well as stock markets of emerging economies. ���Foreign investors were underweight on India earlier because of the fiscal position and significant rupee depreciation. This has changed now,������ says Gopal Agrawal, head, equity, Mirae Asset Global Investments.

With a stronger government at the centre now there is confidence among investors that proper measures would be taken to improve growth, he says. The strong economic fundamentals would help markets deliver a better performance in the long term, says a senior industry official. The better than expected corporate performance in the March quarter that matched the pace of expansion of the previous three months is a sign that the worst is getting over for the economy, say observers.

While BSE-30 and nifty posted a year-to-date (YTD) return of around 57% and 55% respectively (up to June 5), many other emerging market indices managed much lower growth. FIIs have bought equity worth more than $6 billion since mid-March after pulling out $13 billion last year.