The equity markets continued with the negative tone in the first half of the month owing to weak global cues as Europe’s sovereign debt and a decline in commodity prices raised concerns over the global economic recovery. However, with the outcome of better-than-expected industrial growth numbers and positive union budget announcements, the market picked up momentum in the second half of the month. The country’s industrial production witnessed the highest growth in the month of December 2009 as it rose by 16.8%, as against 11.7% in the previous month. This was on the back of a 46% increase in consumer durables and a 38.8% jump in capital goods, indicating speeding up of both consumer demand and investments. Investors also shrugged off the lower-than-expected GDP data for October-December quarter, tracking the budget. The GDP growth rate slipped to 6%, as against 7.9% during July-September quarter. After soaring for four consecutive weeks, the food inflation managed to ease off marginally to 17.58% for the week ended February 13, compared with 17.97% in the previous week.
Both the key market indices, the BSE Sensex Index and the S&P CNX Nifty Index ended the month with marginal gains of 0.5% and 0.8%, respectively. Small and mid-cap stocks underperformed their large-cap peers, during the month. The BSE Midcap index was down by 3.5% while the BSE Small Cap Index lost 2.2%.
Among sectoral indices, the BSE Bankex Index gained 2.5% after the budget proposed to provide Rs. 16,500 crores for recapitalisation of state-run banks. The BSE Auto Index grew by 3.6% due to strong auto sales numbers released during the month and the key positives derived from the budget. The BSE Capital Goods Index and the BSE IT Index surged by 5.5% and 5.3%, respectively and were the top gainers. On the other hand, the BSE Realty Index was hard hit as it fell by 6.9% on the back of expectations of interest rate hardening.
Foreign Institutional Investors (FIIs) who were net sellers in the previous month turned buyers to the extent of Rs. 1216.90 crores in equity and Rs. 3146.10 crore in debt segment. On the other hand, domestic institutions remained negative for six consecutive months and were net sellers to the tune of Rs. 697 crores in equities, however, they were net buyers to the extent of Rs. 11973 crores in debt.
In order to merit funds’ long-term performance, they have been ranked based on their one-year Morningstar risk-adjusted return for this review.
Equity Category Performance
Large Cap
The Large Cap category clocked an average return of 88.4% for the year ended February. Out of 72 funds considered, 35 outperformed the category average. Morgan Stanley A.C.E emerged as the top-performer on the Morningstar risk-adjusted return front. The fund posted a growth of 127.1% over the 12-month period.
Small/Mid Cap
Funds from the Small/Mid Cap category posted an average return of 118% over the one-year period ended February 2010. Out of 46 funds, 21 bettered the category average. Principal Emerging Bluechip surfaced as the best performer on the Morningstar risk-adjusted return parameter in this category. In terms of NAV performance, the fund’s NAV grew by 170.4% over the one-year period.
ELSS (Tax Savings)
Investors in tax-saving mutual funds (also referred to as equity linked savings schemes – ELSS) can avail of tax benefits under Section 80C of the Income Tax Act. The 14 chosen funds posted an average showing of 95.4% on the return front over one-year ended February 2010. Five funds fared better than the category average. ICICI Prudential Tax Plan once again scored over its peers on the risk-adjusted return front. The fund’s NAV appreciated by 132.7% over the one-year time frame.
Moderate Allocation
Funds investing upto 75% of their assets in equities, and the balance in debt and money market instruments constitute the Moderate Allocation category. During the 12-month period ended February 2010, the 18 eligible funds registered a 68.2% average return. 10 funds outperformed the category’s average showing. In terms of the risk-adjusted return, ICICI Prudential Child Care Gift Plan continued to emerge as the best performer. Its NAV rose by 107.7% over the one-year period.
Conservative Allocation
The Conservative Allocation category is constituted of funds which invest upto 30% of assets in stocks; the balance is invested in debt and money market instruments. The category delivered an average return of 18.4% during one-year ended February 2010. Out of 25 funds under consideration, 13 scored better than the category average. HDFC MIP-Long Term topped the category on the risk-adjusted return front; the fund posted a growth of 33.4% over the 12-month period.
