MFs take a brutal knock

52 per cent equity funds trail Sensex during May 10-22.

More than half mutual fund schemes have underperformed the market during the recent carnage on the bourses.

According to data available from mutualfundsindia.com, 52 per cent of equity funds trailed behind market barometer Sensex during the period May 10 to May 22.

While the average return of all growth was pretty much in line with the Sensex, which plummeted 16.89 per cent during the period, the worst performing fund, Taurus Discovery Stock, fell a whopping 25 per cent.

Fund managers blame the underperformance on the over exposure of funds to mid-caps. "The fall must have happened because funds are overexposed to mid caps which performed horribly during the recent market fall," said Rajan Mehta, head of sales, Benchmark Mutual Fund. The BSE-Midcap had fallen by 17.86 per cent over the same period.

There were 22 funds which gave negative returns of 20 per cent and more. But a majority ""247 growth schemes "" lost 10 per cent per cent or more during the period.

Mutual Funds appetite seems to have increased in this volatile phase. They have been net purchasers of Rs 5367 crore this month.

Another fund manager from a leading fund house accepts to have deployed 50 per cent of the funds available from a recent NFO during this period.

The Indian markets seems optimistic with Morgan Stanley estimating FY07 earnings to be a whopping 19.3 per cent. Fund managers maintain that redemption pressures is not the cause of the slide.

One fund manager asserting that there was no redemption pressure said index heavyweights have outperformed the rest during the volatile phase and they have a lot of ideas waiting for implementation at these levels. The fall in returns is not specific to fund themes.

While Benchmark Mutual Fund claims its derivative fund posted positive returns, another fund in the same category, Reliance Equity fund which collected Rs 5750 crores, declined 10.09 per cent over the same period.