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Equity funds post best quarterly gain in 17 yr

This article was posted on Jul 1, 2009 and is filed under Market News

MUMBAI: Actively-managed diversified stock funds in India gained an average 48.7 per cent in three months to June, their best quarterly rise since 1992, as domestic shares clocked their biggest surge in 17 years.

JM Core 11 Fund, a concentrated 11-stock portfolio managed by Asit Bhandarkar, leapt more than 100 per cent during the period to emerge as the top-performing scheme in India, data from global fund tracker Thomson Reuters Lipper showed on Wednesday.

However, more than half the funds missed a swift 49.3 per cent gain in the benchmark index given high cash levels and lower gains from large bets on consumers, drug and energy firms.

“Most of them were not able to catch the entire rally,” said Chintamani Dagade, a senior research analyst with Morningstar. “The underperformance of equity funds was primarily owing to their exposure to non-equity assets like bonds, cash, etc during the early part of the quarter,” he added.

Indian shares rallied during April-June, second only to Vietnam in Asia, on signs of an economic recovery and hopes for market-friendly policies by the re-elected Congress-lead government.

The gain was the biggest rise for the benchmark since it soared 124.5 per cent in the March quarter of 1992 when Manmohan Singh, who was then finance minister, kicked off reforms to open up the economy.

However, many diversified equity funds, which held an average 15 per cent of their assets as cash at the end of March and nearly 14 per cent at end-April, missed the share market surge.

They also invested about 30 per cent of their equity assets in energy sector and defensives such as consumers and drug firms, which lagged behind sharper rallies in sectors such capital goods, financials and metals.
Among other major equity categories, funds investing in financial services firms saw their net values surge nearly 69 per cent in June quarter as shares rallied on improved prospects of reforms such as higher foreign investment limit in the banking and insurance sectors.


Fixed income funds investing in government securities rose 2.3 per cent in three months to end-June, although the benchmark bond yield ended flat, as fund managers capitalised on a volatile bond market on supply concerns.

The 10-year benchmark yield ended steady in the quarter at 7.01 per cent but had touched a low of 6.10 per cent on April 22 after the central bank cut key rates by 25 bps each.

Gold exchange traded funds lost 0.83 per cent during the quarter as safe haven bets receded amid a global economic revival.

Gold futures on the continuation chart ended June at 14,455 rupees per 10 grams, down 4.5 per cent in the quarter.

source: Economictimes

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