Index funds biggest losers of the week

Index funds fell the most in the week to February 23 after the Sensex posted its worst week in seven months on concern that the Indian government may take steps to tame inflation in the Budget announcement.

Average net asset values of funds investing in diverse sectors such as personal care and technology fell 3.48 to 5.02 per cent compared with the 5.04 per cent decline in the Sensex, data from fund tracking company Value Research showed on Tuesday.

Net asset values of 22 funds that mimic either the Sensex or the 50-share S&P CNX Nifty fell 5.02 per cent on average in the past week.

NAVs for Indexed funds, whose portfolio is identical to the composition of the index that they track, are still up 28.5 per cent on average on a yearly basis, making them the second-best performing sector after technology funds.

"The market is apprehensive that the government might take steps to cut down inflation that may be near-term negative for the market,'' Dhirendra Kumar, managing director at Value Research, said.Inflation in Asia's fourth-largest economy has been close to its highest levels in more than two years.

New Delhi-based Kumar said the forthcoming budget for the year to March 2008, to be presented in parliament on February 28, may reintroduce long-term capital gains on equity profit and cut tax concessions on earnings of technology companies.