April 2010: Equity Funds Performance Review

Following the rally witnessed in the month of March, the Indian equity markets kick started the month on a positive note.
By Priyadarshini Dembla |  13-05-10 | 
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About the Author
Priyadarshini Dembla is a research associate with Morningstar. She would like to hear from you, but she cannot provide individual-portfolio or financial-planning advice.

Following the rally witnessed in the month of March, the Indian equity markets kick started the month on a positive note, on account of sustained inflow of foreign funds, strong auto sales figures, rise in credit growth and positive sentiments prevailing in the global markets. However, by the second week of the month, the market lost strength primarily due to concerns over SEBI - IRDA conflict on restricting the insurance companies from issuing new ULIPs, rising inflation and worries over Greece debt situation. Further, the lower-than-expected industrial production data dampened the market sentiments. The Industrial output rose 15.10% in February, as against the January output of 16.70%. The market expected the output to grow by 16.0%. Weakness in the market persisted as it turned volatile following the F&O expiry in the latter half of the month. However, the market took some comfort from the monetary policy outcome which was in line with the market expectation, followed by better monsoon forecast and easing food inflation which helped the market end marginally higher for the month. The rate hikes by  were in line with expectations of a 25-50 basis points (bps) increase; the Reserve Bank of India (RBI) raised repo, reverse repo and cash reserve ratio (CRR) by 25 bps each. Food inflation eased to 16.61% for the week ending April 17, lower than an annual rise of 17.65% in the previous week on a forecast of a good winter crop harvest and an expected normal monsoon this year. 

The benchmark index, BSE Sensex touched a high of 18,047 during the month before finally ending marginally higher by 0.2% at 17,558. Similarly, the S&P Nifty Index closed with a marginal gain of 0.6% at 5,278. BSE Midcap and BSE Smallcap indices well exceeded their large cap counterparts as they gained 5.6% and 8.4%, respectively. 

On the sectoral front, the consumer durable sector emerged as a clear outperformer, driven by an increase in discretionary spending. The BSE Consumer durable Index gained nearly 10%. Interest rate sensitive sectors gained post the RBI hiked the key policy rates in line with market expectation. BSE Realty, BSE Bankex and BSE Auto indices gained 6.7%, 4.7% and 1.7%, respectively. On the other hand, the BSE Oil & Gas Index fell by 2.3% on the back of poor January-March quarter results posted by Reliance Industries which has the highest weightage in the index. Similarly, the BSE Metal Index shed 1.7% due to decline in prices on the London Metal Exchange. 

In the equity segment, the FIIs were net buyers of Rs. 9,361 crores after being net buyers of Rs. 19,928 crores in March. During the current calendar year, foreign investors bought stocks worth Rs. 30,005 crores. In the debt segment, they were net buyers to the tune of Rs. 3,032 crores for the month. On the other hand, domestic institutions continued to sell and have been net sellers to the tune of Rs. 1,733 crores in the equity segment. However, they have been net buyers to the extent of Rs. 66,210 crores in the debt segment. 

In order to merit funds’ long-term performance, they have been ranked based on their one-year Morningstar risk-adjusted return for this review. 

Equity Category Performance  

Large Cap

The Large Cap category clocked an average return of 65.8% for the year ended April 2010. Out of 70 funds considered, 36 outperformed the category average. Morgan Stanley A.C.E emerged as the top-performer on the Morningstar risk-adjusted return front. The fund posted a growth of 96% over the 12-month period.

Small/Mid Cap

Funds from the Small/Mid Cap category posted an average return of 94.9% over the one-year period ended April 2010. Out of 46 funds, 22 bettered the category average. ICICI Prudential Discovery surfaced as the best performer on the Morningstar risk-adjusted return parameter in this category. In terms of NAV performance, the fund’s NAV grew by 124.9% over the one-year period. 


Investors in tax-saving mutual funds (also referred to as equity linked savings schemes – ELSS) can avail of tax benefits under Section 80C of the Income Tax Act. The 14 chosen funds posted an average showing of 74.6% on the return front over one-year ended April 2010. Seven funds fared better than the category average. ICICI Prudential Tax Plan once again scored over its peers on the risk-adjusted return front. The fund’s NAV appreciated by 101.4% over the one-year time frame.

Moderate Allocation

Funds investing upto 75% of their assets in equities, and the balance in debt and money market instruments constitute the Moderate Allocation category. During the 12-month period ended April 2010, the 18 eligible funds registered a 53.5% average return. 11 funds outperformed the category’s average showing. In terms of the risk-adjusted return, ICICI Prudential Child Care Gift Plan continued to emerge as the best performer. Its NAV rose by 97.2% over the one-year period.

Conservative Allocation

The Conservative Allocation category is constituted 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 14.9% during one-year ended April 2010. Out of 29 funds under consideration, 14 scored better than the category average. UTI Children Career Balanced topped the category on the risk-adjusted return front; the fund posted a growth of 27.7% 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 March 2010 have been considered.

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Securities mentioned in this article
Type Name Price(INR) Change(%) Date
Fund HDFC Small Cap Fund Growth  
  32.4400 0.2658 03/07/2020
Fund ICICI Prudential Value Discovery Fund Growth  
  136.6300 0.8861 03/07/2020
Fund ICICI Prudential Long Term Equity Fund (Tax Saving) Growth  
  339.7500 0.4643 03/07/2020
Fund ICICI Prudential Child Care Fund (Gift Plan)  
  129.2700 0.5523 03/07/2020
Fund UTI CCF- Savings Plan - Regular Plan  
  22.6890 0.2368 03/07/2020
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