While the Indian indices — S&P CNX Nifty and S&P CNX 500 — delivered negative returns of 12.47 per cent and 12.04 per cent, respectively, mutual funds performed better with large cap, diversified and small and mid-cap equity funds outperforming both the indices.
According to the Crisil analysis, the small and mid-cap funds fared relatively better with a negative 6.83 per cent return, as compared to negative 10.48 per cent by large cap funds and negative 10.01 per cent by diversified funds in the quarter ended September.
Further, the fall in frontline stocks was more compared to their mid-cap peers over the last two quarters, as observed from the returns of the respective benchmark indices (S&P CNX Nifty and CNX Midcap) for the quarters ended June and September. S&P CNX Nifty, by virtue of having a higher weightage in sectors like commodities, banking and information technology vis-à-vis the CNX Midcap Index (which is more diversified) saw a higher decline, the study noted.
| CONSISTENT PERFORMERS |
EQUITY FUNDS
SMALL AND MID- CAP EQUITY FUNDS |
- Birla Sun Life MNC Fund
- HDFC Mid-Cap Opportunities Fund
- IDFC Premier Equity Fund
- SBI Magnum Sector Umbrella - Emerging Business Fund
DIVERSIFIED EQUITY FUNDS
- Birla Sun Life India GenNext Fund
- Canara Robeco Equity Diversified
- ING Dividend Yield Fund
- Mirae Asset India Opportunities Fund
- UTI Dividend Yield Fund
- UTI India Lifestyle Fund
- UTI MNC Fund
The global uncertainty has severely impacted stocks in these sectors in the last two quarters, it added.A key reason for equity funds outperforming the benchmark indices has been the decrease in equity exposure. “Given the current uncertain environment, the average holding of equity funds has gone down from 95 per cent as on September 30 to almost 93 per cent as on September 30, 2011," says Jiju Vidyadharan, head, funds & fixed income research.
“Crisil Fund Rank 1 equity funds have been more proactive and have reduced their equity exposure from 96 per cent to 92 per cent during the same period,” he added.Historically, the strategy of lowering equity exposure has helped equity funds cushion the downside for a limited period. “Equity funds, by their very mandate, should be fully invested. In the event of a market reversal, funds with a higher equity exposure are likely to outperform the broader markets.
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This was also observed when markets turned around after the 2008 global credit cum liquidity crisis”, added Vidyadharan.Incidentally, equity markets across the world have seen a negative trend in 2011, following signs of a slowdown in the global economy and the European credit crisis.
Indian markets too have been impacted by global issues, with additional domestic factors like high inflation and rising interest rates resulting in weak sentiments.At the fund house level, HDFC Mutual Fund continued to lead the tally of top ranked funds with 13 funds under Crisil Fund Rank 1. This was followed by Birla Sun Life Mutual Fund with 10 funds, ICICI Prudential Mutual Fund and UTI Mutual Fund with six funds each. According to the release, the latest Crisil Mutual Fund Ranking covered nearly 90 per cent of the industry average assets under management of the open-ended schemes, as of September.