Banks, consumer help equity funds better benchmark in Oct

By Aditya Kalra

NEW DELHI (Reuters) - All but one of diversified stock funds posted negative returns in October, tracking the benchmark's worst performance in a year, but their exposure to financials and consumer goods softened the blow.

Around 320 such funds, which form the largest category of stock funds by number and assets under management, saw their unit values fall an average 4.5 percent in the month, data from global fund tracker Lipper, a Thomson Reuters company, showed.

But nearly 90 percent of such funds fell less than the benchmark stock index which fell 7.2 percent, its worst monthly fall in a year, as weak quarterly earnings from some large corporates dented investor sentiment.

"Mutual funds shifted to defensive sectors like consumer, healthcare and financials anticipating correction in equities, given higher index levels," said Chintamani Dagade, senior research analyst at Morningstar India.

Morningstar data showed such funds had around 5.76 percent of their assets in cash at September-end but Dagade said it is likely that they increased cash holdings in their portfolios during the last month.

Banking stocks fell 5.2 percent in the month helping limit the fall as stock funds had investments of more than 250 billion rupees or 14.3 percent of their overall assets in such companies at September-end, ICRA Online data showed.

Funds which invest in consumer goods clocked an impressive average return of 6.4 percent during the period, making them top gainers among equity funds, as the BSE FMCG index rose 9 percent.

Banking, consumer goods and pharmaceutical sectors accounted for over 20 percent of stock funds' assets at September-end.