Investors had reason to cheer in September 2009 as domestic equity markets surged northwards. During the month, the BSE Sensex breached the 17,000-point mark and posted a gain of 9.3%.
On a year-to-date basis, the Sensex has risen by 77.5%. The BSE Mid-Cap Index (up 7.5%) and the BSE Small-Cap Index (up 8.5%) also closed in positive terrain. Higher-than-expected advance tax payments by corporates were seen as a sign of economic revival. Market sentiment was also aided by encouraging Index for Industrial Production (IIP) numbers.
The recent uptick in equity markets can in no small measure be attributed to investments made by Foreign Institutional Investors (FIIs). They have been net buyers for seven months in a row now. During the month, FIIs bought equities of around Rs 183.4 billion (Rs 18,344 crores). Conversely, domestic mutual funds were net sellers to the tune of Rs 23.3 billion (Rs 2,334 crores).
From a sectoral perspective, banking stocks fared well on prospects of higher earnings growth; the BSE Bankex rose by 18.1% over the month. Metal stocks were aided by rising commodity prices; the BSE Metal Index appreciated by 14.5%. Robust sales numbers aided the cause of auto stocks; the BSE Auto Index appreciated by 13.4%.
Equity Category Performance
Large Cap
Funds from the Large Cap category delivered an average return of 34.3% during the year ended September 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 55.9% over the one-year period.
Small/Mid Cap
The Small/Mid Cap category posted an average return of 32.1% over the one-year period ended September 2009. 28 out of 48 funds bettered the category average. ICICI Prudential Discovery surfaced as the best performer on the Morningstar risk-adjusted return parameter. In terms of NAV performance, the fund posted a growth of 68.5% over the 12-month period.
ELSS
Funds from the ELSS category (also referred to as tax-saving funds) offer investors tax benefits under Section 80C of the Income Tax Act. The 14 chosen funds posted an average showing of 34.7% on the return front over one-year ended September 2009. Eight funds outscored the category average. Sundaram BNP Paribas Tax Saver fared better than the competition in terms of the risk-adjusted return. The fund’s NAV appreciated by 41.9% over the one-year time frame.
Moderate Allocation
The Moderate Allocation category is constituted of funds that invest upto 75% of assets in equities and the balance in debt and money market instruments. During the 12-month period ended September 2009, the 19 eligible funds registered a 30.9% average return. 17 funds outperformed the category’s average showing. In terms of the risk-adjusted return, Birla Sun Life 95 surfaced as the best performer. On the NAV appreciation front, the fund posted a growth of 51.5% over a one-year period.
Conservative Allocation
Funds that invest upto 30% of assets in stocks and the balance in debt and money market instruments form the Conservative Allocation category. The category delivered an average return of 16.7% during one-year ended September 2009. Out of 32 funds under consideration, 14 scored better than the category average. Reliance MIP topped the category on the risk-adjusted return front; the fund’s NAV rose by 32.6% over the 12-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 August 2009 have been considered.