Stock funds record worst monthly fall in over 2 yrs

Wed Feb 2, 2011 3:05pm IST

* Worst monthly fall since Oct '08 for diversified stx funds

* Fall in key stock indices hurts performance

* High exposure to financials, energy weighed

By Aditya Kalra

NEW DELHI, Feb 2 (Reuters) - India's diversified stock funds mirrored losses in the benchmark index in January with unit values recording their worst monthly performance since October 2008, data from global fund tracker Lipper showed.

Such funds, which form the largest category of equity schemes by number and assets, posted an average drop of 9.8 percent in the month, compared with a 10.6 percent fall in the 30-share benchmark Sensex .BSESN.

"Mid & small cap funds and infrastructure themed funds were the biggest losers during the month, with these two segments losing investor appeal in January," said Dhruva Raj Chatterji, senior research analyst at Morningstar India.

For a category-wise return of funds, click [ID:nSGE71103C].

High inflation and fears of further rate hikes dented investor sentiment and led to a sharp fall in key stock indices, as foreign funds pulled out $1.4 billion from Indian equities in January. [ID:nSGE70U09F]

Higher exposure to small and mid-cap counters also affected unit values, as diversified equity funds had more than a third of their assets invested in such companies as of December-end, Morningstar India data showed.

Shares of such firms fell more than their larger peers in January, with the BSE mid-cap index .BSEMC losing 12 percent, and the small-cap index .BSESC recording a drop of 12.3 percent during the month.

Exposure to sectors like financials and energy, which together accounted for more than 30 percent of diversified equity fund assets, also hurt funds performance, data showed.

The country's top lenders SBI and ICICI beat estimates in third quarter results, but rising rates in India are likely to dampen the outlook for earnings growth in the near term. [ID:nSGE70N05X]

The BSE Banking index .BSEBANK fell 9.8 percent in January, while the oil & gas index .BSEOIL dropped 10.6 percent.

"It has been a broad-based fall in markets which has affected funds," said R.K. Gupta, managing director of Taurus Mutual Fund. "This is a catch-22 situation for the fund managers".

BOND, GOLD FUNDS

Indian fixed income funds investing in government debt saw net values rise 0.16 percent in January, as yields eased after the central bank's policy review in the last week of the month.

"Policy was not as hawkish as some people were expecting, so the bond yields fell ... that led to the positive return," said Mahendra Jajoo, head of fixed income, Primerica Asset management.

The central bank matched expectations with a 25 basis-point rise in rates on Jan. 25, rather than the 50 basis-point increase some investors had expected. [ID:nSGE70O07R]

For the month, the yield on the actively traded 8.13 percent, 2022 bond IN081322G=CC rose 14 basis points in the month while the less liquid benchmark 10-year bond yield IN078020G=CC was up 23 basis points.

India's gold exchange-traded funds (ETFs) fell 3 percent in the month as yellow metal prices fell on waning safe-haven appeal due to improvement in U.S. data.

On the continuous charts, gold futures MAUc1 ended January at 19,922 rupees per 10 grams, down 3.9 percent for the month.

(Aditional reporting by Neha D'Silva and Siddesh Mayenker, Editing by Ramya Venugopal)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Quarterly Results

Quarterly Results

HDFC Bank net profit up 20 percent, lags estimates.  Full Article 

China Economy

China Economy

China's growth slowest since global crisis, annual target at risk  Full Article 

Coal Reforms

Coal Reforms

Factbox - India pushes ahead with coal reforms  Full Article 

Apple Result

Apple Result

Apple's iPhone sales beat Street but iPad volumes slide  Full Article 

Airport Accident

Airport Accident

Total CEO de Margerie killed in Moscow plane accident - airport spokeswoman.  Full Article 

Nadella's Paycheck

Nadella's Paycheck

New Microsoft CEO Nadella's pay tops $80 mln with big stock awards.  Full Article 

Deregulation Impact

Deregulation Impact

Private fuel retailers to dip toe, not dive back, into India  Full Article 

JLR China

JLR China

JLR sees 20 percent growth in China sales this year - exec  Full Article 

An RBI First

An RBI First

RBI releases minutes of financial stability council's Aug meet  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage