X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Are some of India's most popular funds losing sheen? - Outside View by PersonalFN

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Are some of India's most popular funds losing sheen?
Aug 26, 2013

It would be rare to find an investor who is unmoved even after the recent fall in Indian equity indices. Considering the dire state of India's economy, falling equities shouldn't surprise investors but the manner in which they are shunned nowadays, is worrisome even for an experienced investor. Recently S&P BSE Sensex fell about 800 points in a day posting its steepest fall since July 2009. This might have recalled memories of the bear market of 2008-09. Rupee is hitting fresh lows every day sending shivers down the spine of investors. Measures taken by RBI and the government have fallen flat. Well, under such difficult circumstances, it is crucial to know how some of India's largest mutual fund schemes have performed. Their performance should be compared with the performance of broader markets.

How markets have fared?
NAV data as on August 16, 2013
(Source: ACE MF, PersonalFN Research)

As depicted in the graph above, largecaps have escaped relatively unscathed in the recent market downturn. S&P BSE Sensex about 8.1% over last 3 months. Decline in the midcap space has been severe with S&P BSE Mid-cap falling by around 17.5%. S&P BSE 200 which represents broader markets registered a loss of 11.9% over last 3 months.

Report card...
  1 Month 3 Months YTD
Category Average- Largecap Funds -7.4 -10.9 -9.0
Category Average- Midcap Funds -7.8 -12.5 -16.6
Category Average- Multi-Flexi-Opportunities Funds -7.1 -10.7 -11.2
Category Average- Multi-Flexi-Value Oriented Funds -7.4 -12.1 -13.5
S&P BSE 200 -9.0 -12.2 -9.7
Returns are absolute and in %
# YTD: Year to date i.e. From January 01, 2013 to August 16, 2013
NAV data as on August 16, 2013
(Source: ACE MF, PersonalFN Research)

The table above suggests that largecap oriented funds and multi-flexi and opportunities funds have outperformed the broader markets over the past 3 months. On the other hand, Midcap focused funds and value oriented funds underperformed S&P BSE 200 other the same time period. However, it is noteworthy that performance of all diversified equity funds has been satisfactory as about 2/3rd of them have outpaced S&P BSE 200 on 3-month returns.

Have these popular funds disappointed investors?
Scheme Name 1 Month 3 Months YTD AUM
HDFC Top 200 Fund (G) -8.9 -16.3 -14.4 10874.80
HDFC Equity Fund (G) -9.1 -17.1 -16.2 10328.47
Reliance Equity Opportunities Fund (G) -6.4 -14.8 -15.8 4914.62
Reliance Growth Fund (G) -7.9 -14.6 -19.5 4268.71
UTI Dividend Yield Fund (G) -8.4 -12.3 -12.7 3120.03
S&P BSE 200 -9.0 -12.2 -9.7 -
AUM data as per portfolios disclosed on July 31, 2013
# YTD: Year to date i.e. From January 01, 2013 to August 16, 2013
Returns are absolute and in %
NAV data as on August 16, 2013
(Source: ACE MF, PersonalFN Research)

HDFC Top 200 and HDFC Equity, which together have a corpus of in excess of Rs 20,000 crore, have miserably underperformed S&P BSE 200 over last 3 months. Moreover, they have underperformed on YTD basis. HDFC Top 200 is a largecap oriented fund while HDFC equity is a flexicap fund. Reliance equity opportunities fund which focuses on investment opportunities across sectors and market capitalisation segments, has also underperformed broader markets. Among others, Reliance Growth, a midcap oriented fund and UTI Dividend Yield which follows the tenets of value investing have made losses in excess of those made on S&P BSE 200.

Where have some of India's largest funds invested?
Sector HDFC Equity Fund (G) HDFC Top 200 Fund (G) Reliance Equity Opportunities Fund (G) Reliance Growth (G) UTI Dividend Yield Fund(G)
Banking & Finance 18.19 21.9 13.81 9.78 17.75
Information Technology 16.12 14.7 15.82 18.85 14.48
Oil & Gas / Petroleum Products 8.53 7.71 - - 7.82
Consumer Non-Durables 8.2 8.76   7.16 12.5
Pharmaceuticals - 6.56 12.57 13.23  
Auto 7.15 - - - -
Engineering - - 17.21 8.61 -
Media & Entertainment     7.81    
Cement         8.45
Data as per portfolios disclosed on July 31, 2013
(Source: ACE MF, PersonalFN Research)

A deeper study revealed that heavy exposure to Banking and Finance, Oil & Gas, Auto and Engineering has resulted in them underperforming broader markets. High single stock exposure has contributed further to the loss. Although most of these funds have invested in index heavy largecap stocks belonging to Banking and Finance, Oil and Gas and Engineering sector, they have been overweight on such stocks in comparison to their weight in the diversified indices. Moreover, some index heavy consumer non-durable names are missing from the portfolios. This suggests that underperformance is a result of market momentum. Above given funds carry relatively stable portfolios.

What investors should do now?

PersonalFN is of the view that, in the short term, funds can be volatile and may even underperform the broader markets. Mutual funds essentially are for long term investors. Current underperformance of some of India's biggest mutual fund schemes may be just a blip caused by economic aberrations. However, PersonalFN believes, investors need to be watchful of their performance over a little longer time horizon. Consistent underperformance would highlight weakness of these funds. As noted above, funds catering to different market capitalisations and following different investment styles have underperformed broader markets. However, long term performance of most of them remains promising even now. Importantly, they come from fund houses following sound investment processes. It remains to be seen when these funds would start bucking the downtrend. PersonalFN has always believed that buying popular funds doesn't guarantee you any success. There is no alternative to meticulous assessment of available options. PersonalFN remains unbiased to the popularity of funds and carries out assessment of mutual funds with marked perseverance.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "Are some of India's most popular funds losing sheen?". Click here!

  

More Views on News

DEWAN H.FIN. Announces Quarterly Results (4QFY18); Net Profit Up 25.8% (Quarterly Result Update)

Jul 20, 2018 | Updated on Jul 20, 2018

For the quarter ended March 2018, DEWAN H.FIN. has posted a net profit of Rs 3 bn (up 25.8% YoY). Sales on the other hand came in at Rs 28 bn (up 18.0% YoY). Read on for a complete analysis of DEWAN H.FIN.'s quarterly results.

GEOJIT FINANCIAL SERVICES Announces Quarterly Results (4QFY18); Net Profit Up 26.1% (Quarterly Result Update)

Jul 20, 2018 | Updated on Jul 20, 2018

For the quarter ended March 2018, GEOJIT FINANCIAL SERVICES has posted a net profit of Rs 193 m (up 26.1% YoY). Sales on the other hand came in at Rs 871 m (up 22.9% YoY). Read on for a complete analysis of GEOJIT FINANCIAL SERVICES's quarterly results.

CHOLAMANDALAM INVEST. Announces Quarterly Results (4QFY18); Net Profit Up 31.0% (Quarterly Result Update)

Jul 20, 2018 | Updated on Jul 20, 2018

For the quarter ended March 2018, CHOLAMANDALAM INVEST. has posted a net profit of Rs 3 bn (up 31.0% YoY). Sales on the other hand came in at Rs 15 bn (up 25.7% YoY). Read on for a complete analysis of CHOLAMANDALAM INVEST.'s quarterly results.

HDFC AMC IPO: Do Valuations Leave Enough on Table for Investors? (IPO)

Jul 20, 2018

Should you subscribe to the IPO of HDFC AMC Ltd?

IIFL HOLDINGS Announces Quarterly Results (4QFY18); Net Profit Down 56.6% (Quarterly Result Update)

Jul 20, 2018 | Updated on Jul 20, 2018

For the quarter ended March 2018, IIFL HOLDINGS has posted a net profit of Rs 1 bn (down 56.6% YoY). Sales on the other hand came in at Rs 10 bn (down 27.3% YoY). Read on for a complete analysis of IIFL HOLDINGS's quarterly results.

More Views on News

Most Popular

Sintex's Auditor Resigns. How You Can Protect Yourself from Such Stocks(The 5 Minute Wrapup)

Jul 20, 2018

While the attack on the bad corporate governance is an overhang in the near term...this can be a game-changer in the years to come.

The Answer to Your Wealth Worries: Small Caps (Especially Now)(Profit Hunter)

Jul 10, 2018

If you're worried about the markets - you are on the wrong track. This is opportunity - put your wealth-building hat on, instead - Richa shows you how...

The Multiple Problems with the Minimum Support Price (MSP) System(Vivek Kaul's Diary)

Jul 11, 2018

The price signals that MSP sends out, creates its own set of problems.

ICICI Pru Mutual Fund Tarakki Karega! - The Unethical Way?(Outside View)

Jul 11, 2018

PersonalFN explains how ICICI Prudential Mutual Fund flouted the norms of related party transactions while subscribing to the IPO of ICICI Securities.

PPF v/s Mutual Funds: Which Is Better?(Outside View)

Jul 10, 2018

PersonalFN highlights the key points of distinction between PPF and mutual funds.

More

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS