The markets may be on a roll but most diversified equity mutual funds (MFs) are struggling to catch up with the sudden spurt. Only index-based funds and banking-focused MFs have managed to post decent returns in September. Out of the 300-odd diversified equity funds, only one has managed to beat key indices such as sensex and nifty. But four index-based funds have made it to the top 10 list, giving double-digit returns for the month.
Many small and mid-cap funds — which gave stellar returns during the post-election rally in 2009 — have turned laggards. Many funds from the category are still at the bottom of the performance chart for the 33-month period that saw the markets fall after hitting a peak before staging a recovery. "The (September) rally was sharp and concentrated. Mid-caps (stocks) have undergone a correction," says Gopal Agrawal, head, equities, Mirae Asset Global Investments. "The (relative) out-performance of mid-caps vis-a-vis large caps has come down in the past 3-4 months."
While sensex and nifty gained 11.3% and 11.6% in September, the BSE mid-cap and small-cap indices moved up by 6% and 7.1% respectively. The BSE-100 index have jumped by 9.8%. "It is not a broad-based rally and it's very difficult to beat the indices when money moves into a very few large-cap stocks," says Mahesh Patil, head (equities, domestic assets), Birla Sun Life MF. "The portfolios (of funds) were not positioned for such a fast rally," says Sankaran Naren, CIO, equities, ICICI Prudential MF.
The discount in valuations between mid-caps and nifty has come down from 40-50% to around 15% now, say market observers. "It is on the lower side compared to historical averages," an observer says. Large-cap stocks and funds would do well as long as there is liquidity, say industry officials. The broader market and indices would catch up after a brief pause, they say.
Incidentally, a vast majority of equity funds are yet to retrace the peaks scaled in January 2008. More than 110 out of the 220-odd diversified equity MFs, which have a more than 33-month record, are still in the red. Only 13 funds managed to post double-digit returns during the period, data shows
Source: http://timesofindia.indiatimes.com/business/india-business/Index-funds-race-ahead-in-Sept-surge/articleshow/6687417.cms
Many small and mid-cap funds — which gave stellar returns during the post-election rally in 2009 — have turned laggards. Many funds from the category are still at the bottom of the performance chart for the 33-month period that saw the markets fall after hitting a peak before staging a recovery. "The (September) rally was sharp and concentrated. Mid-caps (stocks) have undergone a correction," says Gopal Agrawal, head, equities, Mirae Asset Global Investments. "The (relative) out-performance of mid-caps vis-a-vis large caps has come down in the past 3-4 months."
While sensex and nifty gained 11.3% and 11.6% in September, the BSE mid-cap and small-cap indices moved up by 6% and 7.1% respectively. The BSE-100 index have jumped by 9.8%. "It is not a broad-based rally and it's very difficult to beat the indices when money moves into a very few large-cap stocks," says Mahesh Patil, head (equities, domestic assets), Birla Sun Life MF. "The portfolios (of funds) were not positioned for such a fast rally," says Sankaran Naren, CIO, equities, ICICI Prudential MF.
The discount in valuations between mid-caps and nifty has come down from 40-50% to around 15% now, say market observers. "It is on the lower side compared to historical averages," an observer says. Large-cap stocks and funds would do well as long as there is liquidity, say industry officials. The broader market and indices would catch up after a brief pause, they say.
Incidentally, a vast majority of equity funds are yet to retrace the peaks scaled in January 2008. More than 110 out of the 220-odd diversified equity MFs, which have a more than 33-month record, are still in the red. Only 13 funds managed to post double-digit returns during the period, data shows
Source: http://timesofindia.indiatimes.com/business/india-business/Index-funds-race-ahead-in-Sept-surge/articleshow/6687417.cms
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Index Funds seems to be better investment avenues, But I guess with the market going up we can expect Equity Mutual Funds to perform better over the coming period of Time.
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