FII limit proposal buoys banking sector funds

Among debt funds, MIPs top the chart.

Equity fund performances were more or less in line with that of the previous week. Banking sector funds were the best of the lot last week, followed by index funds.

However, petroleum funds fared poorly, showing negative weekly returns. Debt fund performances were lacklustre. While monthly income plans (MIPs) continued to top the table, medium term and income fund categories slipped into the negative territory.

With the markets on the rise again, equity fund performances were on expected lines. The Sensex soared above the 9,200-mark to achieve its all-time high of 9284.46 on Friday.

Banking stocks had a good run last week, buoyed by the finance ministry's proposal to hike the FII investment limit in public sector banks to 24 per cent from the current 20 per cent. Leading banking stocks such as ICICI Bank, SBI and HDFC Bank, posted impressive gains during the week.

This was reflected in the performance of banking sector funds too. The category average for the week amounted to 3.17 per cent, the best among all equity categories. Banking funds were the worst performers during the previous week, posting a mere return of 0.03 per cent.

Index funds were the next best performers with a return of 2.10 per cent, followed by FMCG funds (1.32 per cent) and technology funds (1.30 per cent). Diversified funds posted an average weekly return of 1.06 per cent. Petroleum sector funds were the only ones to record a negative return at 0.08 per cent.

On an yearly basis, equity categories continued to perform impressively. Once again, it was the FMCG funds which topped the tables with a return of 65.58 per cent. Tax-planning funds (55.53 per cent) and diversified funds (50.88 per cent) were the next best performers, while petroleum funds continued to lag with a return of 19.72 per cent.

Fund managers continue to be bullish on equities. According to Sukumar Rajah, chief investment officer- equity at Franklin Templeton Mutual Fund, from a medium to long term perspective, the outlook is positive given the strong fundamentals on the economic and corporate fronts.

Further, Rajah said, "Economic growth is expected to improve demand for goods and services across sectors and this should lead to better profit growth for the corporate sector. Global investors are positive on emerging markets in general and India in particular given the expected superior growth of these economies compared with the developed economies over the next few decades. This, combined with an increase in domestic inflows, should help the equity markets."

Debt fund performances were patchy. While most categories matched the previous week's performance, medium term and income funds slipped into the negative territory. MIPs were the best performing category, posting a return of 0.26 per cent for the week, followed by liquid funds (0.11 per cent) and floating rate funds (0.09 per cent).

Medium term and income funds were at the bottom of the pile, both recording similar returns of -0.03 per cent. On an annual basis too, it was the MIPs which came out on top with a return of 10.26 per cent. Short-term funds and floating rate funds followed at 5.78 per cent and 5.63 per cent, respectively. Short-term gilt funds were the least impressive one with a return of 4.42 per cent.