NEW DELHI (Reuters) - Stock funds that invest in consumer goods and pharma sectors led mutual fund gainers in May, while diversified equity funds fell in line with the benchmark as key stock indices dropped on euro zone worries.
Funds which focus on investing in the consumer goods space returned an average 2.47 percent during the month, as the BSE FMCG index rose 3.57 percent, outperforming the BSE Sensex that fell 3.5 percent, data from global fund tracker Lipper showed.
"Lower interest rates, rising economic growth and, in turn, employment, are contributing to demand for consumer goods," said Chintamani Dagade, senior research analyst at Morningstar India.
India's economy grew an annual 8.6 percent in the March quarter from a year earlier, driven by robust manufacturing sector on the back of government and consumer spending, government data showed on Monday.
However, diversified equity funds, which form the largest category of stock funds by number and assets, fell 3.62 percent on average, a tad more than the fall in the BSE Sensex.
The benchmark index posted its first monthly decline since January as investors turned risk-averse on worries the debt crisis in the euro zone could hamper global economic recovery.
A significant exposure of such funds to mid- and small-cap companies also hurt unit values as the BSE Mid-cap index dropped nearly 5 percent while the small-cap index fell 7.17 percent during the month.
These funds had nearly 40 percent allocated to small- and mid-cap companies as of April-end, data from fund tracker ICRA Online showed.
Dagade said euro zone debt concerns hurt investor sentiments and fund managers preferred to sit in cash in order to protect the funds' downside, and there are chances that allocation to cash would have been increased in May.
Among other sectoral schemes, pharma funds bucked the trend and gained 2.43 percent in May, as the BSE Healthcare index rose 2.72 percent, with investors looking at the defensive sector to avoid market downturn, experts said.
"Outlook is extremely positive, I think pharma is a structural story for next three years," said Jayesh Shroff, fund manager at SBI Mutual Fund, whose offerings include SBI MSFU Pharma Fund.
India's gold exchange-traded funds (ETFs) returned 7.71 percent as euro zone woes prompted safe-haven buying in the yellow metal, pushing prices higher in May.
On the continuous charts, gold futures ended May at 18,385 rupees per 10 grams, up 7.35 percent, after touching a record high of 18,648 rupees on May 26.
"We are currently witnessing a spectacular bull market in gold prices on the back of global economic turmoil and serious inflationary concerns," said Amar Singh, head of commodities research, Angel Broking.
Fixed income funds that invest in government securities gained 0.72 percent in May as the 10-year benchmark bond yield fell 56 basis points in May, the biggest since the 77-basis-point decline in April 2009, Reuters data showed.
Additional reporting by Jeanette Rodrigues, Editing by Tony Tharakan and Harish Nambiar