Indian equity markets experienced volatility and posted marginal negative returns in June, owing to weak global cues, foreign funds outflows in the last couple of weeks and the possibility of below normal monsoon that caused investors a concern.
The equity markets indices, however, were up during the first two weeks, owing to expectations of strong economic reforms from the newly formed government and foreign inflows.
Strong infrastructure output and better industrial production data also boosted the investor sentiments during the month. The infrastructure sector output grew 4.3% year-on-year in April 2009.
Investor sentiment was also buoyed by the positive industrial production data, which registered 1.4% growth in April 2009, after declining for three times in the previous four months.
During the month, the Bombay Stock Exchange’s Sensex declined by 0.9%, while the National Stock Exchange’s Nifty index fell 3.5%. Foreign institutional investors net invested Rs 38.3 billion in Indian equities in June, much lower than Rs 200 billion investments made in May.
Mutual funds invested Rs 8.4 billion in stocks last month, lower than Rs 23 billion invested in May. Mid-cap stocks outperformed their large and small-cap counterparts, owing to their favorable valuations.
From a sector perspective, financials sector posted the highest gain of 25%, as measured by the MSCI India Index.
The energy sector registered the second highest gain and delivered 20% return, driven by an increase in crude oil prices. During the month, crude oil prices jumped 5.4% to 69.8 dollar a barrel.
The telecommunication services sector registered the least return during the month.
India Large Cap
The India Large Cap category registered 18.8% negative risk-adjusted return, during the one-year period ended June. Out of 136 funds, which completed one-year performance, 64 funds outperformed the category average.
UTI Contra posted the highest return among the large-cap category peers. In terms of risk-adjusted return, the fund posted 1.1% negative return. However, on an absolute basis, the fund was up 21.4% during the one-year period. It was ranked four stars by Morningstar during the three-year period.
India Small/Mid Cap
The India Small/Mid Cap category underperformed their large-cap category peers and posted 29.1% negative risk-adjusted return, during the one-year period ended June, owing to relative attractive valuations of large-cap peers.
Out of 67 funds, 41 funds outperformed their category peers. Birla Sun Life Dividend Yield Plus was the best performing fund in this category. The fund posted 1.8% return. On an absolute basis, the fund was up 27.4% during the one-year period. It was rated five stars during the three-year period.
India ELSS
The India ELSS category registered 21.2% negative risk-adjusted return, during the one-year period. Out of 25 funds considered, 13 funds registered better returns than category average. Sahara Taxgain was the best performing fund with 6.0% negative risk adjusted return. On an absolute basis, the fund posted 21.2% return during the one-year period.
India Moderate Allocation
The India Moderate Allocation category includes funds, which invest up to 70% in stocks and the rest in debt and money market instruments. During the year, this category registered 8.7% negative risk-adjusted return.
Out of 40 funds, 24 funds outperformed the category average. Birla Sun Life Asset Allocation Moderate registered the largest gain in this category. The fund delivered 4.2% risk-adjusted return, during the one-year period. On an absolute basis, the fund posted 16.2% return and was rated five stars.
India Conservative Allocation
The India Conservative Allocation category includes funds, which invest up to 30% in stocks and the balance in debt and money market instruments. This category delivered 2.3% risk-adjusted return, during the one-year period. Out of 57 funds, 31 funds outperformed the category average during the period.
Reliance MIP was the best performing fund in this category and delivered 16.2% risk-adjusted return. On an absolute basis, the fund was up 26.8% return during the one-year period. The fund was rated by five stars by Morningstar, during the three-year period ended June.