Banking sector funds top performer last week

Banking sector funds led the way last week in the equity fund category. This category posted an average return of 4.87 per cent for the week, the highest in the equity category.

FMCG funds and tax planning funds with returns of 3.52 per cent and 2.44 per cent, respectively, were the next best. One notable shift from the previous week's table was that auto sector funds, which have been languishing in the red, made a push into the positive territory, clocking 0.91 per cent returns.

However, index funds went the other way, slipping into the negative territory, after encouraging performances in the past few weeks. The only other category which gave negative return was the petroleum sector funds, which came in last.

Among the banking sector funds, Reliance Banking Fund and UTI Banking Sector Fund, returned 4.70 per cent and 5.07 per cent, respectively, for the week, which was well above their benchmark index""BSE Bankex, which returned 2.44 per cent.

However, over the past 12-month period, they have failed to outperform the index. While the BSE Bankex gave a return of 73.47 per cent, Reliance Banking Fund and UTI Banking Sector Fund managed returns of 65.71 per cent and 72.25 per cent, respectively.

According to Sanjay Dongre, fund manager of UTI Banking Sector Fund, the outlook on the banking sector has improved vastly in the past year.

"Most banks have reported a decline in net non-performing assets (NPAs) and their net interest income has also gone up. Banks have also managed to cash in on the big investments taking place across sectors, especially in the infrastructure segment, thereby improving their loan book positions," says Dongre, who added that banks are set to see a big improvement in their bottomlines going forward.

"There are still a lot of undervalued stocks in the banking space, especially the PSU ones. These stocks will get their due valuation sooner than later which augurs well for the sector as a whole," he said.

However, over the past one-year period, banking funds have lagged behind the toppers""FMCG funds and tax planning funds. While FMCG funds came out on the top with one-year returns of 78.50 per cent, tax planning funds were second at 74.88 per cent.

Banking sector funds were third at 70.59 per cent. The worst performer in the equity category continued to be the petroleum sector funds, which gave returns of 28.59 per cent. The largest equity fund category, diversified funds gave a weekly return of 1.81 per cent, while their returns for the past one year amounted to 61.42 per cent.

The best performing equity diversified funds in the past week were""Taurus Discovery Stock (5.65 per cent), GIC Fortune 94 (4.79 per cent) and HSBC Midcap fund (4.43 per cent).

Equity fund managers are still betting on the good times to continue. Given the backdrop of the economic growth entering into a higher trajectory and the fact that almost 80 per cent of India's economy is domestically driven (and therefore less impacted by global factors), Indian equity markets offer a good investment opportunity from the medium to long term perspective," notes Sukumar Rajah, chief investment officer - equity at Franklin Templeton Mutual Fund.

The action on the debt fund front continues to be dull, with most categories just about managing to stay in positive territory. The top performing category of monthly income fund gave a weekly return of 0.27 per cent, followed by floating rate funds at 0.10 per cent.

In the income fund category, the top performers last week were Prudential ICICI Blended Plan (0.22 per cent), JM Equity & Derivative Fund (0.16 per cent) and Chola Income Plus (0.15 per cent).