Debt funds struggle to stay afloat, equity peers on a roll

Debt funds continued to struggle in the past week, with most of them just about managing to end on a positive note. Monthly income plans (0.15 per cent) along with floating rate fund (0.10 per cent) and short-term debt funds (0.10 per cent) were the leaders in the debt category. Equity funds were more cheerful, with most fund categories ending last week on a positive note.

While FMCG funds were the best performers for the week, the previous week's toppers index funds slipped to mid-table. Auto sector funds continued to be in the red along with petroleum sector funds. 

The line up Returns in % as on July 01, 2005
Equity funds - Average category returns
	1 week	1 year
FMCG	1.71	72.76
Tax Planning	1.60	69.13
Banking	1.11	57.32
Diversified	0.89	56.94
Technology	1.53	53.20
Auto	-0.15	49.61
Index	1.09	46.54
Pharma	1.60	41.95
Petroleum	-0.32	29.14

Tax planning funds, which topped the one-year category average return table last week, slipped to the second position with returns amounting to 69.13 per cent.

The largest equity fund category, diversified funds, managed one-year returns of 56.94 per cent, while their gains of the past week amounted to 0.89 per cent. The leading performers in this category over the past year are both SBI mutual fund schemes--SBI Magnum Global (111.21 per cent) and SBI Magnum Sector Umbrella - Contra (99.01 per cent).

Mid-cap oriented funds, Reliance Growth (91.94 per cent) and Sundaram Select Midcap (89.78 per cent) were also among the top five. In fact, nearly 66 per cent of diversified funds have managed to outperform the Sensex (48.21 per cent) over the same period.

In fact, all equity fund categories have given one-year returns in excess of 40 per cent, save petroleum sector funds, which came in last at 29.14 per cent. With benchmark indices at all-time high levels, market players are betting on equities for long-term growth, even though they did not rule out short-term corrections.

"The markets will witness short-term corrections, but the outlook for equities is very positive for the next three years," says Krishnamurthy Vijayan, chief executive officer of JM Financial Asset Management Co.