* Worst quarter for equity diversifed funds since Dec 08
* Exposure to capital goods, financials hurts
* Diversified equity schemes fall 1.45 pct in Sept
By Aditya Kalra
NEW DELHI, Oct 4 India's diversified stock funds
posted their worst quarterly performance in nearly three years,
as rising interest rates, slowing economic growth and global
debt worries led to a fall in key stock indices.
Such funds lost an average 9.84 percent in the September
quarter, their weakest quarterly performance since the
October-December 2008 period when they fell over 20 percent,
data from fund tracker Lipper, a Thomson Reuters company,
(For a table of mutual fund returns, click
The fall mirrored the drop in the benchmark index
which declined 12.7 percent during the same period, the index's
biggest fall since shedding 25 percent in the December 2008
"Capital goods and industrials were the biggest contributors
to the poor performance of equity funds," said Dhruva Raj
Chatterji, senior research analyst, Morningstar India.
"Large-cap equity funds fell more than their mid-cap cousins
during the quarter."
Losses in the capital goods sector , which fell 22.7
percent in the quarter, hammered unit values as equity
diversified funds had an over 20 percent exposure to this sector
as of end-August, data from Morningstar India showed.
Metal stocks also contributed to the fall, as reflected in
the BSE metal index which fell 27 percent.
Mutual funds were also hit by investments in financial
services stocks, another favourite theme of managers with an
over 20 percent allocation, as the banking index fell
15.4 percent on worries about slowing credit growth amid a
rising interest rate environment.
Data showed that fund managers slowly increased their
combined exposure to small- and mid-cap stocks in recent months
to 36.5 percent of assets by end-August, their highest level
since January 2011.
The move, however, did not help funds, as the BSE mid-cap
index fell 10.6 percent and the small-cap index
slumped 15.6 percent in the September quarter.
Among sectoral equity schemes, funds that invest in the IT
sector fell 13.3 percent, tracking the 13.5 percent fall in the
BSE IT index , while banking funds lost an average 15.3
percent in the quarter.
Gold exchange traded funds (ETFs) staged an impressive
performance in the quarter, rewarding investors with an over 17
percent average return as global debt woes boosted the yellow
metal's appeal, sending prices higher.
Diversified equity funds fell 1.45 percent on average in
September, nearly in line with the 30-share BSE index's fall of
1.34 percent in the month, data showed.
Funds' investments in capital goods and metals proved to be
a drag on unit values, as the sectoral indices fell 10.82
percent and 9.1 percent, respectively, in September.
Gold exchange traded funds (ETFs), which were star
performers in August, lost 3.4 percent in September as gold
On the continuation charts, India's gold futures MAUc1
ended the month at 25,989 rupees per 10 grams, down 4.4 percent.
"Fundamentally, nothing has changed on gold ... prices could
go much higher," said Chirag Mehta, fund manager - commodities
at Quantum Asset Management.
Among debt schemes, funds that invest in government
securities returned 0.26 percent in the month, Lipper data
(Editing by Sunil Nair)