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Jun 08, 2012, 09.52 AM IST
Fund managers were cautious in their buying activity, and weren't ruling a further slide in the markets. As some investors found it uncomfortable to stay invested in equities, mutual fund houses reeled through redemption pressures as well.
Domestic mutual funds being encouraged by the present valuations of the Indian equity markets net bought cautiously to the tune of Rs 350 crore in May 2012, thereby bucking their April month's activity where they net sellers to the tune of Rs 677 crore. Fund managers though were cautious in their buying activity, and weren't ruling a further slide in the markets. As some investors found it uncomfortable to stay invested in equities, mutual fund houses reeled through redemption pressures as well.
BSE Sensex vs. MF inflows
(Source: ACE MF, Personal FN Research) As far as the performance of various categories of mutual funds is concerned, in the diversified equity fund category, across market capitalisation and style of fund management, losses were seen. Even sector funds such as pharma and FMCG - which are generally considered to be defensive, too reported losses. Funds focusing on the banking & financial services and infrastructure theme ended the month in red, and so did tech funds (despite a 6.4% fall in value of the Indian rupee).
In the Fund of Fund (FoF) schemes, the debt oriented funds managed to deliver positive returns, while the rest all ended the month in red. Speaking about the hybrid funds, balanced funds too felt the impact of the descending move of the Indian equity markets, and thus all of them reported losses in the month gone by. However some of the Monthly Income Plans (MIPs), holding greater composition of lower maturity papers (of less than 5 years) benefited from drop in yields. Debt mutual funds, across categories and tenure showed a decent performance in the month gone by, as yields for both short and longer maturity papers fell. In the maturity profile of 3 to 5 years, short-term gilt funds delivered appealing returns, followed by income funds which generally hold papers having maturity profile of upto 2 years. Long-term funds also gained with expectation of rally in the bond market, as lower GDP growth rate and sharp fall in Brent crude oil price left room for the RBI cut rates in first quarter mid-review of monetary policy 2012-13 (scheduled on June 18, 2012). Moreover, RBI bond purchase addressing to the issue of tight liquidity also aided the debt mutual funds to perform well.
It is noteworthy that FIIs too exuded confidence in the Indian debt market and net bought to the tune of Rs 1,893 crore, thereby bucking their April month's activity where they net seller to the tune of Rs 3,788 crore. Domestic mutual funds too were net buyers in the Indian debt markets to the tune of Rs 19,109 crore; but this net buying was far muted as compared to April month’s figure of Rs 41,130 crore. Performance across various categories of mutual funds
(1-Mth average returns of funds in various categories as on May 31, 2012)
(Source: ACE MF, Personal FN Research) The graph above depicts how various categories of mutual funds performed in the previous month. Amongst the sector and thematic funds, all of them delivered negative returns, but banking and infra funds were the ones who took the maximum beating. In the diversified equity funds category too, across market capitalisation and styles wealth erosion was seen. However, tracing with upward move in the price of the precious yellow metal - gold, Gold ETFs exhibited positive returns for investors (gaining by an average of +1.2%). Likewise debt mutual funds across categories gained from descending move shown by both short-term and long-term debt papers.
PersonalFN is a Mumbai based Financial Planning and Mutual Fund Research Firm.
Related News Tags: diversified equity fund , Gold ETFs
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