Only seven per cent of the mutual funds, numbering a total 322, managed to beat the Sensex. Low levels of cash and higher exposure to banking and the financial sector seem to have helped a handful of equity schemes, which have managed to outperform the Sensex during the past two months.
The Sensex has given 48.65 per cent returns during the period March 9, 2009 to May 5, 2009, rising from 8160 to 12,131.
These funds include equity, equity (tax planning), equity diversified, index funds, and sector funds including technology, banking, FMCG, pharma and auto.
It is mainly the sector funds which invested in the banking and financial services theme and select index funds and exchange-traded funds (ETFs), which beat the Sensex during the period under discussion.
“Banks have done well as their asset quality is expected to rise when the economy is expected to grow,” said Mr Prashant Poddar, fund manager, ICICI Prudential MF. “Secondly, with the interest rate having declined very fast in the past two months and the G-sec yields coming down, the banks have made handsome gains which boosted the bank stocks,” said Mr Poddar.
The Sensex has given 48.65 per cent returns during the period March 9, 2009 to May 5, 2009, rising from 8160 to 12,131.
These funds include equity, equity (tax planning), equity diversified, index funds, and sector funds including technology, banking, FMCG, pharma and auto.
It is mainly the sector funds which invested in the banking and financial services theme and select index funds and exchange-traded funds (ETFs), which beat the Sensex during the period under discussion.
“Banks have done well as their asset quality is expected to rise when the economy is expected to grow,” said Mr Prashant Poddar, fund manager, ICICI Prudential MF. “Secondly, with the interest rate having declined very fast in the past two months and the G-sec yields coming down, the banks have made handsome gains which boosted the bank stocks,” said Mr Poddar.
Banking sector funds
The banking sector funds; ICICI Prudential Banking and Financial Services, Reliance Banking fund, Religare Banking, Sahara Banking and Financial Services Fund, UTI Banking Sector and Sundaram BNP Paribas Financial Services Opportunity are among the theme funds that have recorded returns of over 48.65 per cent returns. However, none of these managed to outperform the 72.79 per cent rally of the Bankex during the given period.
But the bank ETFs gave better returns than the bank theme funds. Benchmark Bank BeES and Reliance Banking ETF managed returns of 67 per cent and 66 per cent, respectively.
Amongst the diversified equity and other theme funds, JM Basic, JM Small &Midcap, Principal Emerging Bluechip, Magnum Midcap, Magnum IT, Mangum emerging business, Mirae Asset India Opportunities Fund, Taurus Infrastructure, Templeton India Equity Fund and Canara Robeco Equity Diversified are some of the funds which have managed to outperform the Sensex.
For most of the schemes it was the low cash levels, which seems to have done the trick for them.
The out-performance is due to a combination of low cash levels which was around 6-7 per cent as on March and a good stock selection process, said Mr Pankaj Tibrewal who manages the Principal Emerging Bluechip fund.
“We follow an almost 90 per cent cash deployment and so when the rally happened in the past few weeks, we were not sitting on cash,” said Mr Arindam Ghosh, Chief Executive Officer, Mirae Asset Management Company, whose Opportunities Fund also maintained low cash level.
“Also our increased bias towards large cap stocks in the past few months has helped the India Opportunities Fund,” he said.
In the case of Canara Robeco’s equity diversified fund, Mr Anand Shah, the Head of equities at the fund house says: “We were more or less fully invested in growth companies rather than keeping high cash levels or in defensive sectors.” Cash levels were around 10.86 per cent as on March 31, 2009, said Mr Anand.
The banking sector funds; ICICI Prudential Banking and Financial Services, Reliance Banking fund, Religare Banking, Sahara Banking and Financial Services Fund, UTI Banking Sector and Sundaram BNP Paribas Financial Services Opportunity are among the theme funds that have recorded returns of over 48.65 per cent returns. However, none of these managed to outperform the 72.79 per cent rally of the Bankex during the given period.
But the bank ETFs gave better returns than the bank theme funds. Benchmark Bank BeES and Reliance Banking ETF managed returns of 67 per cent and 66 per cent, respectively.
Amongst the diversified equity and other theme funds, JM Basic, JM Small &Midcap, Principal Emerging Bluechip, Magnum Midcap, Magnum IT, Mangum emerging business, Mirae Asset India Opportunities Fund, Taurus Infrastructure, Templeton India Equity Fund and Canara Robeco Equity Diversified are some of the funds which have managed to outperform the Sensex.
For most of the schemes it was the low cash levels, which seems to have done the trick for them.
The out-performance is due to a combination of low cash levels which was around 6-7 per cent as on March and a good stock selection process, said Mr Pankaj Tibrewal who manages the Principal Emerging Bluechip fund.
“We follow an almost 90 per cent cash deployment and so when the rally happened in the past few weeks, we were not sitting on cash,” said Mr Arindam Ghosh, Chief Executive Officer, Mirae Asset Management Company, whose Opportunities Fund also maintained low cash level.
“Also our increased bias towards large cap stocks in the past few months has helped the India Opportunities Fund,” he said.
In the case of Canara Robeco’s equity diversified fund, Mr Anand Shah, the Head of equities at the fund house says: “We were more or less fully invested in growth companies rather than keeping high cash levels or in defensive sectors.” Cash levels were around 10.86 per cent as on March 31, 2009, said Mr Anand.
Underperformance
While funds with lower cash levels and higher exposure to banking have fared well, the funds with high cash levels or which were underweight on high beta stocks appear to have seem to have lost in the rally.
“A large number of funds had become defensive towards high beta stocks such as commodity and metal, so it was difficult to re-align them in the past two months,” said Mr Anoop Bhaskar, Head of Equities at UTI Mutual Fund..
Most of the equity schemes had reduced their exposure to stocks which had performed badly during 2008, but it was these very stocks which have been the best performers since March 9, said Mr Bhaskar.
While funds with lower cash levels and higher exposure to banking have fared well, the funds with high cash levels or which were underweight on high beta stocks appear to have seem to have lost in the rally.
“A large number of funds had become defensive towards high beta stocks such as commodity and metal, so it was difficult to re-align them in the past two months,” said Mr Anoop Bhaskar, Head of Equities at UTI Mutual Fund..
Most of the equity schemes had reduced their exposure to stocks which had performed badly during 2008, but it was these very stocks which have been the best performers since March 9, said Mr Bhaskar.
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