If you wanted to make the best of the recent stock market rally, equity funds investing in domestic stocks have been a better bet than funds that invest overseas.
In the market fall last year, overseas funds contained losses better than domestic equity funds.
However, the tables have turned this year with a little over a third (seven out of 22) of the international funds managing to better the average returns of diversified equity funds.
If the more stringent S&P CNX 500 is taken as a benchmark, less than a fifth of international funds managed this act.
Domestic equity funds have returned 90.2 per cent over one year.
Rupee factor
The rupee appreciating over seven per cent against the dollar in the last one year affected the returns on all international funds relative to their India-focused peers.
Funds focused on other emerging markets such as China and other Asian countries or those that invested in a diversified basket of global stocks turned out to be the slow movers among the international funds.
These funds lost out as they invested in sectors such as telecom, consumer durables, semiconductors, and banks, which did not rally as much as ‘hot' themes such as commodities or natural resources.
Others betting on themes such as real-estate or investing in US bonds and treasuries also lost out. Funds such as Sundaram BNP Paribas Global Advantage and ING OptiMix Global Commodities that invest in mutual fund units of other global fund-houses such as Credit Suisse, First State and Martin Currie also underperformed.
Themes that clicked
The out-performers among international funds were the ones which either had a mixed mandate (with some allocation to India) or ones betting on gold or natural resources. Gold prices, which have rallied over 56 per cent over the last one year, have benefited funds investing in this commodity and the companies involved in mining it.
AIG World Gold and DSP BR World Gold, which gained 122.5 per cent and 96.7 per cent respectively for one year, in addition to investing in gold, also invest directly in stocks of mining companies such as Goldcorp, Newcrest Mining, Barrick Gold Corp benefiting from the rally in gold and the stocks.
Overseas funds managed by well-known global houses also did well with Templeton India Equity Income and Fidelity International Opportunities both delivering 120.1 per cent and 92.6 per cent respectively.
These funds have invested about 25-30 per cent of their portfolio in overseas equities and the rest in domestic markets. Apart from the Indian exposure, overseas exposure to mining stocks such as BHP Billiton and Rio Tinto as well as some gold mining stocks also played a key role.
ING Latin America Equity benefited from investing in stocks in countries such as Brazil, which benefited from both rally in oil prices (around 30 per cent in the last one year), and other commodities.
Mirae Asset Global Commodities Stock Fund has also benefited mainly by playing the same themes.
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