Equity funds continue to be under pressure

Mutual fund performances last week were more or less a mirror image of their performance in the previous week. With equity markets coming under selling pressure last week, equity funds were also under pressure.

All equity fund categories ended the week with losses. Debt fund performances were also a continuation of the previous week's trends.

All pure debt fund categories ended the week with gains, though equity allocation in monthly income plans (MIPs) dragged the category average into the negative territory.

Banking sector funds were the worst affected among equity fund category. The average category return was a negative 6.32 per cent, 300 basis points down from its previous week returns.

Pharma sector funds also suffered, with their category returns for the week standing at -4.99 per cent. Index funds gave a weekly return of -3.62 per cent.

In comparison, the Sensex returns amounted to -3.44 per cent, while Nifty returns stood at -3.63 per cent. Diversified funds gave an average return of -3.11 per cent.

Auto sector funds suffered the least damage, though their returns were also in the negative. For the week, auto sector funds gave a return of -0.63 per cent, which was an improvement from -3.94 per cent they managed in the previous week. Technology sector funds came in next with a return of -1.54 per cent, which bettered their previous week return of -3.12 per cent.

Despite the recent downturn in equity markets, fund managers continue to be bullish on equities. "We believe that the economic and corporate fundamentals continue to be strong, which means that equities as an asset class have the potential to deliver over the medium to long term," said Sukumar Rajah, CIO - equity, Franklin Templeton Mutual Fund.

"However, given the overtly optimistic view taken by investors, we will have to wait and see if earnings growth matches the heightened expectations in the coming quarters," he added.

However, for the past 12 months, equity funds continued to perform well, though returns have taken a minor hit because of the recent market meltdown. FMCG funds continued to top equity category averages, with an annual return of 81.05 per cent.

Banking and tax planning funds were came in next with 64.35 per cent and 59.01 per cent returns, respectively. Petroleum sector funds once again came in last with returns at 14.56 per cent.

In the debt fund category, income funds topped category averages for the week with a return of 0.15 per cent, followed by long-term gilt funds at 0.11 per cent and liquid funds at 0.10 per cent.

While MIPs came in last with -0.49 per cent returns for the week, they were the best performers for the past 12-month period with a return of 10.12 per cent, followed by short-term debt funds (5.86 per cent) and medium-term funds (5.57 per cent). Short-term gilt funds were the worst of the lot with a return of 4.30 per cent.