The surprise stock market bounce in January caught many fund
managers napping, resulting in various equity schemes underperforming their
benchmarks during the month. These fund managers had stocked up on shares of
consumer goods, pharma and auto companies - the winners in 2011 - in their
portfolios, but the new year rally was led by a fresh lot, including
infrastructure and metals, which were mostly laggards last year.
Their inability to shuffle their portfolios in a short period caused their schemes to underperform the benchmarks. Out of the 275-odd diversified equity funds, 155 have underperformed key indices over the past one month.
"Most fund managers were caught off guard... The rally happened purely on the back of strong foreign portfolio inflows, which continued to come in throughout January," said PVK Mohan, equities head at Principal Mutual Fund, adding, "Many funds could have underperformed because of their exposure to defensive stocks." Foreign institutional investors have invested over Rs 13,000 crore in Indian stocks this year.
Though one month is a short time to gauge a fund's performance, analysts said fund managers had erred in committing too much to the gainers of 2011, especially when valuations were expensive. The situation revived memories of March 2009 when the start of the rally caught most fund managers unawares. Then, many of them were sitting on cash but were unwilling to invest as they were not sure whether the worst was over.
While the 30-share Sensex has gained over 12% in January, sectoral indices like BSE Bankex, BSE Metal and BSE Realty have gained 25-28% last month. ET Construction index - which includes top infrastructure and engineering companies - has gained over 35% in January alone, while FMCG firms have gained just about 1- 3%.
Their inability to shuffle their portfolios in a short period caused their schemes to underperform the benchmarks. Out of the 275-odd diversified equity funds, 155 have underperformed key indices over the past one month.
"Most fund managers were caught off guard... The rally happened purely on the back of strong foreign portfolio inflows, which continued to come in throughout January," said PVK Mohan, equities head at Principal Mutual Fund, adding, "Many funds could have underperformed because of their exposure to defensive stocks." Foreign institutional investors have invested over Rs 13,000 crore in Indian stocks this year.
Though one month is a short time to gauge a fund's performance, analysts said fund managers had erred in committing too much to the gainers of 2011, especially when valuations were expensive. The situation revived memories of March 2009 when the start of the rally caught most fund managers unawares. Then, many of them were sitting on cash but were unwilling to invest as they were not sure whether the worst was over.
While the 30-share Sensex has gained over 12% in January, sectoral indices like BSE Bankex, BSE Metal and BSE Realty have gained 25-28% last month. ET Construction index - which includes top infrastructure and engineering companies - has gained over 35% in January alone, while FMCG firms have gained just about 1- 3%.
A senior official of a bank-sponsored mutual fund said most
fund managers started aligning their portfolios after the first week of
January, fearing a repeat of March 2009. It takes about 8-12 trading sessions
for a fund manager to align a portfolio of 40 stocks.
Money managers take more time to align larger portfolios. It takes about 17-21 days for a fund manager to align a portfolio of 80 stocks, say analysts.
"We're aligning our portfolios to changing market conditions. We've increased our exposure to interest rate sensitive sectors. We'll be able to put up a better performance this year," said Navneet Munot, chief investment officer, SBI Mutual Fund.
PVK Mohan of Principal Mutual is also reworking his portfolio, making minor changes in weight ages and allocations. "We're not moving out of defensives totally... We're not out of the woods completely. We'll have to wait for election and then Budget before taking a directional call," he said.
Money managers take more time to align larger portfolios. It takes about 17-21 days for a fund manager to align a portfolio of 80 stocks, say analysts.
"We're aligning our portfolios to changing market conditions. We've increased our exposure to interest rate sensitive sectors. We'll be able to put up a better performance this year," said Navneet Munot, chief investment officer, SBI Mutual Fund.
PVK Mohan of Principal Mutual is also reworking his portfolio, making minor changes in weight ages and allocations. "We're not moving out of defensives totally... We're not out of the woods completely. We'll have to wait for election and then Budget before taking a directional call," he said.
Source: http://economictimes.indiatimes.com/markets/analysis/fund-managers-miss-bus-as-stocks-stage-a-surprise-rally/articleshow/11734075.cms
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