It has been a tough week for equity funds

Equity funds had a tough time last week, with only technology funds managing positive returns last week. All other categories ended up in the red.

Technology funds led the way with gains of 1.83 per cent, while the next best was petroleum sector funds, which narrowly failed to make it to the positive territory.

Statistically, the Sensex gained only 1.84 per cent last week, but the overall market sentiment is very different, with the index comfortably perched at all-time high levels.

Market players are confident that the short-term glitches are no pointers to how equities will perform over the long term.

According to Bobby Surendranath, vice president-equity at Standard Chartered Mutual Fund, the valuations are still reasonable.

"The markets are not that expensive at a P/E (Sensex) of 14 times," he said.

Notwithstanding the relative underperformance of equity funds last week, it is worth remembering that as a category they have performed much better than all other asset classes.

In fact, all equity fund categories have given returns close to 30 per cent in the past year on the back of strong buying investor interest.

Tax planning schemes have been the best performing equity categories for the past 12 months, managing returns of 68.13 per cent, followed by FMCG funds at 66.53 per cent.

Equity diversified schemes gave returns of 56.96 per cent to come in third, much higher than their index benchmarks, Nifty (42.53 per cent) and Sensex (44.94 per cent).

Coming back to the weekly performance, the UTI Mutual Fund's Index Select fund was the biggest gainer over the last week posting a return of 1.86 per cent.

Leading funds such as the Franklin India Bluechip (0.90 per cent), Alliance Equity fund (0.95 per cent) and Chola Growth fund also forced their way into the top 10.

On the other hand, two Birla mutual fund schemes, Birla Midcap fund (-2.50 per cent) and Birla Dividend Yield Plus fund (-2.31 per cent) fared the worst during the week.

However, these funds have given a good account of themselves with returns of 64.97 per cent and 51.11 per cent over the past one year.

In fact the top ranked fund, based on 12-month returns, SBI Magnum Global Fund (121.08 per cent) finds itself among the bottom ten, equity diversified funds based on last week's performance, clocking negative returns.