Six months into the year and the good news for the Indian equity markets continue to be few and far between. The markets witnessed one of the worst-ever falls in January and has been gasping for breath ever since.
The months of May and June saw the markets go down further, by 5.04 per cent and 18 per cent respectively. However, after the spate of bad news, the unexpected has happened. The equity markets actually managed to post positive returns in July. The Sensex was up by nearly 7 per cent during the month, largely driven by the survival of the UPA government.
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The Sensex's revival benefited the diversified equity funds category. The diversified equity funds were up by 4.9 per cent in July - a truly remarkable recovery considering the average fall of 17 per cent in June (which was incidentally the worst 1-month fall in the past five years).
The category's best-performing fund was LICMF Growth, which gained 12 per cent, while the worst-performing fund was Escorts Growth with an 8 per cent fall.
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Among other equity fund categories, Equity Banking registered a complete turnaround of fortunes, emerging as the best-performing category, after being the worst performer in the previous month.
The category posted returns of seven per cent while the sector index, BSE Bankex was up by nearly 10 per cent.
The banking funds' performance was noteworthy because they managed to stay afloat despite the soaring inflation and interest rate fluctuations. However, the category's overall performance has been quite dismal, having lost nearly 38 per cent in the year, which is the worst among all equity categories.
Following the banking funds were the equity tax-planning funds, which gained 4.98 per cent. This category had also lost 17 per cent in the previous month. Giving it company were Equity Auto and Equity FMCG, which recovered from their lows and posted returns of 3.9 per cent and 0.9 per cent respectively.
Another equity category that did well was Equity Pharma. After having been down by six per cent in June, the category posted returns of a positive 1.9 per cent in July. The category's overall performance throughout the year has been better than its peers, having lost only 13 per cent, which is much lower compared to other equity categories.
However, not all equity categories had a good time. The Equity Technology which lost 2.9 per cent and was the only equity category to end July in the red. However, the category did better than it had in June when it was down by 14 per cent. In the year so far, technology funds have lost nearly 30 per cent.
Moving on from the equity funds, Gold ETFs were in the limelight again this month, albeit with a negative feel. After topping the return charts in the two previous months, the category slipped to the bottom in July.
Gold ETFs turned in negative returns of 3.3 per cent. However, on a longer-term horizon, the category has fared really well, having fetched a handsome 17 per cent so far this year.
On the debt front, all debt categories ended the month in the positive zone with the exception of the medium- and long-term guilt funds, which lost 0.04 per cent.
Just like in the previous months, the debt funds with shorter maturity periods performed better than the long-term debt funds and gilt funds. The RBI's CRR and repo rate hike had affected the returns of longer maturity debt funds.
Well, so July turned out to be a good month for the markets, a rarity this year. All we can do now is hope the good turn of events continue in the coming months as well. Touchwood!
Value Research