In Debt funds, short term and ultra short term funds have led the space, with many outperforming benchmarks with returns of around 10%. In equity MFs, many investors have benefitted by investing in international funds due to dollar appreciation, thus delivering returns of around 15%.
Overall during 2013, debt mutual funds have delivered over 7.5% returns on an average. Short Term Funds and Ultra Short Term have led the space, with many funds outperforming benchmarks with returns of around 10%; which had not been the case for the past few years. For 2014-2015, we estimate the government bond 10y yield to be around 8.6% to 8.9% - marginally lower than the current 9.11%, due to continued tight liquidity, high inflationary expectations. We therefore believe that short term bonds and debt funds with 3 year and above maturity papers are expected to lead the way for next.
Equity Mutual Funds:
With the Rupee losing significant value, the Technology and Pharmaceuticals have led the returns for the equity markets in 2013 with 40% and 20% performance respectively. Many investors have also benefitted by investing in international mutual funds due to USD appreciation, thus delivering returns of around 15%. Broader equity Indices such as Sensex has also outperformed the Nifty by a small margin. Large caps have generated 3.5% although the disappointing factor has been the banking and infrastructure space which continues to lag by delivering -10% and -8% respectively.