Petroleum funds step on the gas

Equity fund categories put up a much improved performance last week, with all categories managing positive returns. With the markets continuing their upward journey for the second week running, equity fund performances also reflected the positive sentiment.

Petroleum funds were the best performers during the week, followed by pharma funds. Debt fund performances were also stable, with the upsides in equity markets pushing monthly income plan (MIP) returns in to positive territory.

With foreign institutional investors back in the buying mode, equity markets continued their resurgence last week. The Sensex gained 398.3 points during the week to close at 8471.04 - its highest level in one month since October 11, 2005.

Equity fund performances were mixed in the previous week (week ended November 04, 2005), with banking, auto, pharma and petroleum funds languishing in the negative category.

The situation was much different this week with all these categories moving in to positive territory. In fact, petroleum funds made the biggest upmove last week, with the category returns advancing from -0.97 per cent in the previous week to 7.72 per cent last week.

The upsides in this category mainly came on the back of gains in oil stocks such as BPCL. BPCL was the biggest gainer among Nifty stocks last week. The stock advanced 15.80 per cent to close at Rs 437.20. The upsides in oil stocks were mainly on the back of a sharp fall in global crude oil prices, which led to a recovery in major refinery shares.

Pharma funds also moved into positive territory at 5.50 per cent. Technology (5.49 per cent) and index funds (4.74 per cent) were the next best performers on a weekly basis, while diversified funds returned 4.71 per cent. FMCG funds were the worst performers on a weekly basis and could manage only 3.72 per cent.

Equity fund performances continued to be impressive over the one-year period, with FMCG funds leading the way. FMCG funds managed a return of 72.04 per cent, followed by banking funds at 61.61 per cent and tax planning funds at 57.94 per cent.

Diversified funds gave an annual return of 52.26 per cent. On the other end of the table, petroleum funds continued to struggle, coming in last with a return of 16.78 per cent.

Despite the rebound in equity fortunes in the past fortnight, fund managers continue to be cautious about future outlook.

"Since the market crossed 8,500 levels on the Sensex we have maintained a cautious stance on the mark et. The same continues for the current quarter," says Anup Bhaskar, head of equities, Sundaram Mutual Fund.

"Liquidity flows, especially from FIIs could be lower than expected in the coming months. We are also concerned about the second quarter numbers - several sectors reported numbers lower than estimated," he added.

In the debt category, MIPs returned to the top with a weekly return of 0.84 per cent. Income funds were the second best with 0.15 per cent, while long-term gilt funds came in last with a return of 0.07 per cent.

On a yearly basis also, MIPs topped the debt category returns with 10.53 per cent. This was followed by medium-term funds at 6.68 per cent. Short-term gilt funds were last with 4.49 per cent.