The post-Lehman meltdown was a once-in-a-century event, but the way the equity markets across the world reinvented themselves in a span of a few months is the stuff of legends.
With changing market dynamics, Indian fund managers too promptly reshuffled portfolios, changed sectoral preferences and adopted suitable strategies to keep their funds afloat. Diversified equity schemes have thus managed to deliver one year average trailing returns of about 90% with a good number of them having conveniently returned over 100% for the period.
Tuning their strategies to the whims and fancies of the market, many fund managers had cautiously begun to deploy their excessive cash holdings back into the equity markets since April this year. The cash holdings — raised to as high as 25-40% by equity funds last year to protect capital from further erosion — finally found their way back into the equity mainstream. Those prompt enough to do so have also reaped in the best of the returns even as others followed suit. The cash holdings of the equity schemes are thus back to the pre-meltdown levels of 5-7% for the quarter ended September 2009.
Growth oriented mid-cap stocks are back in vogue after their 2008 debacle. Mid-cap stocks have become an obvious choice for most funds since many fund managers rightly believe that steam is already out of the large caps. However, having burnt their fingers last time, these fund managers are taking cautious calls before venturing into the midcap space — targeting those with ample and clear growth visibility and liquidity, provided they are available at reasonable valuations.
“Last year everything fell irrespective of quality. This year, everything is on a rise — again irrespective of quality. We are thus treading high cautiously in these markets,” says Anand Shah, head of equity at Canara Robeco.
Even as preferences with respect to choice of stocks and market capitalisation has undergone considerable change since last year, the mutual fund industry appears quite unanimous in its choice of sectors. Energy, infrastructure (including capital goods) and financial services continue to dominate the sectoral preferences of the Indian fund managers. With power and infrastructure being the focal point of the country’s economic development, stocks catering to this segment — especially in the mid-cap space — have become the fund managers’ hot picks.
Says Mahesh Patil, co-head of Equity at Birla Sun Life AMC: “These sectors are here to stay irrespective of the changes in the political circuit.”
While consumer goods and pharmaceuticals — favourites of 2008 — have seen little shrinkage in popularity, Information Technology and Automobiles appear to have generated to renewed interest in fund managers this year.
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