The strong rally in stock market in April boosted the performance of small/mid cap shares, driven by strong inflows from institutional investors. The small/mid cap funds outperformed their large cap counterparts, driven by the strong reversal in investor risk appetite.
In April, Indian equities continued to advance in line with other global indices on sound global cues and expectations of a revival in the world economy, led by a series of stimulus packages announced by the various governments.
The surprise cut in interest rates by the Reserve Bank of India also buoyed investor sentiments. The central bank cut the repo and reverse repo rates by 25 basis points to 4.75% and 3.25% respectively, last month in order to inject more liquidity into the banking system.
The improvement in global investment climate also pushed equities higher. During the month, the Bombay Stock Exchange’s Sensex gained 17.5%, while the National Stock Exchange’s 50-share index Nifty advanced 15.0%.
Mutual funds' activity remained subdued as they net invested just Rs 180 million in equities. Most equity funds missed the rally in April as nearly 90% of the equity funds underperformed the broader indices during the month.
Though fund managers reduced cash exposure in their equity funds to benefit from rally, they were early to book profits as they sold Rs 111.3 billion of equities last month.
Foreign institutional investors pumped in Rs 65.1 billion in Indian equity markets, resulting sharp rally in equity markets. This was the highest investment by foreign investors in a single month of the current calendar year.
Equity Category Performance
India Large Cap
The rally in equity markets boosted returns of large-cap equity funds, which delivered 11.9% returns last month. These funds, however, lagged the broader indices, owing to their exposure to cash and money market instruments.
Out of 123 funds, only six funds managed to outperform the category benchmark, the BSE Sensex Index. Within this category, DBS Chola Opportunities delivered the highest return of 20.4%. Among laggards, Escorts Leading Sectors was the worst performer during the month.
India Small/Mid Cap
The Morningstar Small/Mid Cap category outperformed its large cap category peers and registered 13.6% return in April, owing to attractive valuations of small-and mid-cap stocks.In comparison, the CNX Mid-cap Index, the benchmark for the category, posted 13.3% return.
Out of 71 funds considered, 36 funds beat the category benchmark during the month. Within this category, Principal Junior Cap recorded the highest return of 24.5%, while Kotak MNC registered the least return of 6.0%.
India ELSS
This category registered 11.6% return in April, compared with its benchmark, the BSE 200 Index, which registered 17.5% return. Out of 25 funds considered within this category, only one fund outperformed the category benchmark. DBS Chola Taxsaver was the best performer and delivered 19.5% return. Among laggards, Escorts Tax Plan posted the lowest return of 5.0%. The ELSS (equity-linked savings scheme) funds offer tax benefit for investments up to Rs. 1 lakh under section 80C of the Income Tax Act.
India Moderate Allocation
The moderate allocation funds invest up to 70% in stocks and the rest in debt and money market instruments. During the month, the category registered 9.0% return, driven by surge in equities.
Out of 44 funds, 22 funds managed to outperform the peers’ average for the month. ICICI Prudential Child Care Gift Plan was the best performing fund in this category. In April, the fund delivered 15.7% return. Among laggards, Baroda Pioneer Children Study posted the lowest return of -0.1%.
India Conservative Allocation
The conservative allocation funds invest up to 30% in equities and the rest in debt and money market instruments. This category registered 3.4% return in April. Out of 54 funds, 24 funds outperformed the category peers during the month.
Within this category, ICICI Prudential Income Multiplier delivered the highest return of 8.8%, compared with its peers, which generated 3.4% return. SBI Magnum Plus Savings was the worst performing fund and registered -0.2% return.