Equity funds fail to capitalise on Jan rally; outlook muted

NEW DELHI Mon Feb 4, 2013 3:11pm IST

A broker reacts while trading at a stock brokerage firm in Mumbai November 6, 2008. REUTERS/Arko Datta/Files

A broker reacts while trading at a stock brokerage firm in Mumbai November 6, 2008.

Credit: Reuters/Arko Datta/Files

Stocks

   

NEW DELHI (Reuters) - Diversified equity mutual funds underperformed the broader market by a wide margin in January, as exposure to financials and to mid- and small-cap stocks hit returns, according to data compiled by fund tracker Lipper.

Funds overall returned 0.45 percent during a month in which the BSE Sensex rose 2.4 percent, up for a third consecutive month on the back of continued strong foreign net inflows and government reform measures such as allowing diesel prices to rise.

Muted gains in financials particularly weighed on funds. Fund managers had bet big on financials leading up to the Reserve Bank of India policy review on January 29, but a cautious stance on further monetary easing surprised investors even as the central bank cut interest rates.

Investment managers are more cautious this month, ahead of India's 2013/14 budget to be unveiled on February 28. The government is under pressure to rein in spending and subsidies to meet its fiscal deficit targets and avoid a ratings downgrade.

"It's a very difficult call for the fund managers," said R.K. Gupta, managing director at Taurus Mutual Fund.

"If the subsidy burdens, budgetary deficit rise, FII selling cannot be ruled out," he added referring to foreign institutional investors.

The BSE banking index rose 1.6 percent in January, dampening the overall performance of funds as the exposure to financials had reached 26.5 percent of total assets held by diversified stock funds as of the end of December, according to separate data from Morningstar India.

Meanwhile, mid- and small-cap stocks lagged peers in January, hurting performance, given these stocks collectively accounted for nearly 38 percent of assets as of end December according to the Morningstar data.

The BSE mid-cap index fell 2 percent, while the small-cap index fell 4.14 percent in the month.

Funds focused on the information technology (IT) sector emerged as the best performers in January, gaining 10 percent on an average, as corporate earnings from Infosys and Tata Consultancy Services boosted the sector.

(Reporting by Aditya Kalra; Editing by Jeremy Laurence)

FILED UNDER:

Lost AirAsia Flight

Indonesia's vice-president Jusuf Kalla (L) monitors progress in the search for AirAsia Flight QZ8501 during a visit to the National Search and Rescue Agency in Jakarta December 28, 2014 in this picture supplied by Antara Foto. REUTERS/Antara Foto/Wahyu Putro A

Indonesia says missing AirAsia plane could be at "bottom of sea"

A missing AirAsia jet carrying 162 people could be at the bottom of the sea after it was presumed to have crashed off the Indonesian coast, an official said on Monday, as countries around Asia sent ships and planes to help in the search effort.  Full Article | Slideshow 

REUTERS SHOWCASE

Telecom Sector

Telecom Sector

Bharti Airtel drops move to charge more for VoIP calls  Full Article 

Indian Economy

Indian Economy

GDP growth expected to be "much better" in 2015/16 - Jaitley  Full Article 

Market Eye

Market Eye

Sensex rises on global cues; metals stocks rally  Full Article 

Thriving Market

Thriving Market

HK-Shanghai stock link hurdles spark derivatives boom  Full Article 

Anti-Trust Probe

Anti-Trust Probe

For Qualcomm, China settlement may be just the beginning  Full Article 

Japanese Banking

Japanese Banking

Exclusive - Japan's regional banks face stress test for ultra-low rates  Full Article 

India in 2014

India in 2014

A review of the top stories from India  Full Coverage 

Reuters India Mobile

Reuters India Mobile

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