Emerging markets may have given a lot of cheer for global investors in the past few months. But Indian investors who bet on funds that invest in stocks of other emerging markets would have little reason to celebrate with their returns trailing diversified equity mutual funds (MFs) by a huge margin.
Emerging markets and Asia-focused equity funds have underperformed equity MFs significantly. While equity MFs returned 76.75% in three months (up to June 5) emerging market funds have managed to post a growth of only between 36.3% and 60.7%, 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 NSE Nifty posted a year-to-date (YTD) return of 56.6% 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.
The Brazilian benchmark index Bovespa has risen 28.4% (between January 5 and June 5) while the Hang Seng recorded an YTD growth of 29.8%. Only Shanghai Composite and Jakarta Composite indices came closer clocking 51.2% and 53.4% jump.
Many funds including Principal Global opportunities that invests in an MF focused on emerging market equities and ING's global real estate and Latin America funds returned only about half of what the benchmark indices gave in three months. Franklin Asia equity growth fund that invests in a host of large-cap companies in China and South Korea including PetroChina, China Mobile, Hyundai Mobis and Samsung Electronics managed to grow only by 39.2% during the period. Commodity focused global funds have fared far worse. While Birla Sun Life global multi commodity growth fund returned 18.59%, ING Optimix global commodities posted a 31.02% increase, Value Research data shows. Mirae Asset global commodity stocks fund however notched up a higher growth of 66.18%.
Emerging markets and Asia-focused equity funds have underperformed equity MFs significantly. While equity MFs returned 76.75% in three months (up to June 5) emerging market funds have managed to post a growth of only between 36.3% and 60.7%, 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 NSE Nifty posted a year-to-date (YTD) return of 56.6% 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.
The Brazilian benchmark index Bovespa has risen 28.4% (between January 5 and June 5) while the Hang Seng recorded an YTD growth of 29.8%. Only Shanghai Composite and Jakarta Composite indices came closer clocking 51.2% and 53.4% jump.
Many funds including Principal Global opportunities that invests in an MF focused on emerging market equities and ING's global real estate and Latin America funds returned only about half of what the benchmark indices gave in three months. Franklin Asia equity growth fund that invests in a host of large-cap companies in China and South Korea including PetroChina, China Mobile, Hyundai Mobis and Samsung Electronics managed to grow only by 39.2% during the period. Commodity focused global funds have fared far worse. While Birla Sun Life global multi commodity growth fund returned 18.59%, ING Optimix global commodities posted a 31.02% increase, Value Research data shows. Mirae Asset global commodity stocks fund however notched up a higher growth of 66.18%.
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