August 2009 proved to be a testing month for investors as domestic equity markets experienced a volatile phase. Concerns over a poor monsoon and unfavourable global cues, among other factors had an adverse impact on markets.
On the other hand, markets took comfort from better-than-expected Index for Industrial Production (IIP) numbers and the proposed direct tax code draft.
Also, it was a month in contrast. The BSE Sensex shed 0.02%; conversely, the BSE Mid-Cap Index and the BSE Small-Cap Index posted gains of 5.60% and 12.75% respectively. Clearly, investors in the mid and small cap segments had reason to rejoice. Both, Foreign Institutional Investors (FIIs) and domestic mutual funds were net buyers in the equity markets. While FIIs bought equities to the tune of Rs 49.0 billion (Rs 4,902 crores), the corresponding figure was around Rs 5.7 billion (Rs 570 crores) for domestic mutual funds.
From a sectoral perspective, stocks from the Consumer Durables sector (represented by the BSE Consumer Durables Index – up 5.65%) and the Information Technology sector (BSE IT Index – up 5.31%) fared the best. Stocks from the FMCG (fast moving consumer goods) sector were on the receiving end of the monsoon shortfall and its expected impact on rural consumption. The BSE FMCG Index shed 6.74% during the month.
Equity Category Performance
India Large Cap
The India Large Cap category clocked an average return of 11.5% during the year ended August 2009. Out of 71 funds considered, 35 outperformed the category average. UTI Opportunities emerged the top-performer on the Morningstar risk-adjusted return front. The fund’s NAV rose by 28.0% over the one-year period.
India Small/Mid Cap
Funds from the India Small/Mid Cap category posted an average return of 7.8% over the one-year period ended August 2009. Out of 48 funds, 30 bettered the category average. Birla Sun Life Dividend Yield Plus surfaced as the best performer on the Morningstar risk-adjusted return parameter. In terms of NAV performance, the fund posted a growth of 37.0% over the twelve-month period.
India ELSS
Investments in funds from the India ELSS category are eligible for tax benefits under Section 80C of the Income Tax Act. The 14 chosen funds posted an average showing of 12.0% on the return front over one-year ended August 2009. Seven funds outscored the category average. Reliance Tax Saver scored over all its peers in terms of the risk-adjusted return. The fund’s NAV appreciated by 18.9% over the one-year time frame.
India Moderate Allocation
Funds that invest upto 75% of assets in equities, and the balance in debt and money market instruments constitute that the India Moderate Allocation category. During the twelve-month period ended August 2009, the 20 eligible funds registered a 13.9% average return. 10 funds outperformed the category’s average showing. In terms of the risk-adjusted return, Reliance Regular Savings-Balanced surfaced as the best performer. On the NAV appreciation front, the fund posted a growth of 30.7% over a one-year period.
India Conservative Allocation
The India Conservative Allocation category is comprised 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 12.9% during one-year ended August 2009. Out of 31 funds under consideration, 15 scored better than the category average. Reliance MIP topped the category on the risk-adjusted return front; the fund’s NAV rose by 27.1% over the twelve-month period.
Note: For the purpose of this analysis, funds have been ranked based on their one-year Morningstar risk-adjusted return; only growth options have been considered. Further, only funds with AUM of more than 20% of the average category AUM as on July 2009 have been considered.