Equity funds stage a comeback, techs sizzle

After last week's aberration, equity funds bounced back to top mutual fund category returns. Technology sector funds topped the average category returns for the week at 4.78 per cent. In the debt category, monthly income plans continued to top the table with 0.51 per cent returns.

Last week, debt funds had outperformed equity funds with all debt categories giving positive returns. In comparison, FMCG and auto sector funds were the only ones to end in positive territory last week. 
 

HOLDING FORT
Equity funds	1 week	1 year
Technology	4.78	52.99
Auto	3.44	60.24
Petroleum	3.24	24.51
Tax planning	3.22	79.67
Diversified	2.95	65.86
Index	2.60	51.00
FMCG	2.04	85.92
Pharma	1.73	48.93
Banking	1.42	80.18
Debt funds	1 week	1 year
Monthly income plans	0.51	11.29
Income funds	0.18	3.43
Medium term funds	0.16	5.05
Gilt long term	0.16	3.64
Short term funds	0.11	5.62
Floating rate funds	0.10	5.26
Liquid funds	0.10	5.22
Gilt - short term	0.08	4.03
Average category returns in % as on September 2, 2005

Technology funds surged to the top, on the back of an impressive performance by the top IT sector stocks last week.

The upsides in technology counters came on the back of a landmark deal between Dutch bank ABN Amro and software majors TCS and Infosys.

While TCS bagged a contract worth $260 million, the biggest ever outsourced to an Indian IT company, Infosys got a $140 million contract, which is its single largest order till date.

Gains in top IT stocks led to a 4.31 per cent gain in the BSE IT index.

The next best performers in the equity category last week were auto and petroleum sector funds whose weekly returns were 3.44 per cent and 3.24 per cent, respectively.

Banking sector funds were the worst performers last week, returning only 1.42 per cent.

As far as performance for the past 12-month period was concerned, FMCG funds remained at the top, with 85.92 per cent returns. Banking sector funds came in next with 80.1 per cent returns.

The largest equity category, diversified funds, came in fourth behind technology funds, with 65.86 per cent returns.

Petroleum funds were again the laggards, coming in last with 24.51 per cent returns for the past year.

With the benchmark Sensex closing last week just below 7,900, at its life-time high, sentiment in equity markets are upbeat.

Analysts note that as an asset class, equities will outperform all others going forward, though they are not ruling out short-term corrections.

Says KN Sivasubramanian, senior portfolio manager - equity, Franklin Templeton Mutual Fund, "While we continue to be positive about the long-term prospects of the domestic markets, the dampeners could be the high oil prices, impact of new government spending programmes on public finances and impact of rising US rates on global liquidity."

Debt funds struggled last week, with only monthly income plans (MIPs) able to clock double-digit returns for the past year.

MIPs returned 11.29 per cent for the past 12 months, while the best performing pure debt category was short term funds which managed 5.62 per cent returns.

These two categories topped the weekly return tables also last week.

Income funds were the worst debt category over the past 12-month period, short-term gilt funds came in last on a weekly basis.