Indian equity markets registered positive returns during July on better-than-expected first quarter (April-June) earnings, sound global cues and above normal monsoon. The markets, however, were negatively impacted during the early part of the month, owing to disappointments from the Union Budget, which lacked the much expected economic reforms.
During the month, the Bombay Stock Exchange’s Sensex and the National Stock Exchange's Nifty registered 8.1% and 8.05% gains respectively.
Mid-cap stocks outperformed their large and small-cap counterparts, as measured by the BSE Mid Cap Index, which registered 9.7% gain, while the BSE Small Cap Index, was up 8.1%.
Foreign institutional investors net deployed 110 billion rupees in equities and 21 billion rupees in debt instruments, during the month. Mutual funds net invested 11.5 billion rupees in equity market and whopping 281.2 billion rupees in fixed-income instruments, during the month.
From a sector perspective, the automobile industry registered the largest gain of 25%, as measured by the BSE Auto Index, driven by increased consumption amid benign interest rates.
The fast moving consumer goods sector posted the second best gain of 21%, as measured by the BSE FMCG Index, on above normal rains in the second half of the month.
The information technology sector, as measured by the BSE IT Index, posted 20% return on attractive valuation of technology companies.
The capital goods was the worst performing sector during the month as it declined by 1.6%, on no major push on infrastructure sector in the Union Budget.
In order to merit funds’ long-term performance, we have ranked funds based on their one-year Morningstar risk-adjusted return for this review.
India Large Cap
The India Large Cap category registered 29% negative risk-adjusted return, during the one-year period ended July. Out of 124 funds, which completed one-year performance, 63 funds outperformed the category average.
UTI Opportunities posted the highest risk-adjusted return among the large-cap category peers. The fund posted 10.2% negative return. In terms of absolute return, the fund was up 29.8% during the one-year period. It was ranked five starts 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 37.7% negative risk-adjusted return, during the one-year period ended July. Out of 66 funds, 39 funds outperformed their category peers. UTI MNC was the best performing fund in this category. The fund posted 9.2% negative return. On an absolute basis, the fund was up 21.8% during the one-year period. It was rated five stars during the three-year period.
India ELSS
The India ELSS category registered 31.8% negative risk-adjusted return, during the one-year period. Out of 29 funds considered, 16 funds registered better returns than category average. Sahara Taxgain was the best performing fund with 17.1% negative risk adjusted return. On an absolute basis, the fund posted 24.2% 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 18.9% negative risk-adjusted return. Out of 41 funds, 24 funds outperformed the category average.
Birla Sun Life Asset Allocation Moderate registered the largest return in this category. The fund delivered 4% negative risk-adjusted return, during the one-year period. On an absolute basis, the fund posted 21.1% 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 6.3% negative risk-adjusted return, during the one-year period. Out of 56 funds, 31 funds outperformed the category average during the period.
Reliance MIP was the best performing fund in this category and delivered 5.9% risk-adjusted return. On an absolute basis, the fund was up 27.4% return during the one-year period. The fund was rated by five stars by Morningstar, during the three-year period ended July.