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Wednesday November 4, 06:10 PM
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Banks, consumer help equity funds better benchmark in Oct
By Aditya Kalra
NEW DELHI (Reuters) - All but one of diversified stock funds posted negative returns in October, tracking the benchmark's worst performance in a year, but their exposure to financials and consumer goods softened the blow.
Around 320 such funds, which form the largest category of stock funds by number and assets under management, saw their unit values fall an average 4.5 percent in the month, data from global fund tracker Lipper, a Thomson Reuters company, showed.
But nearly 90 percent of such funds fell less than the benchmark stock index which fell 7.2 percent, its worst monthly fall in a year, as weak quarterly earnings from some large corporates dented investor sentiment.
"Mutual funds shifted to defensive sectors like consumer, healthcare and financials anticipating correction in equities, given higher index levels," said Chintamani Dagade, senior research analyst at Morningstar India.
Morningstar data showed such funds had around 5.76 percent of their assets in cash at September-end but Dagade said it is likely that they increased cash holdings in their portfolios during the last month.
Banking stocks fell 5.2 percent in the month helping limit the fall as stock funds had investments of more than 250 billion rupees or 14.3 percent of their overall assets in such companies at September-end, ICRA Online data showed.
Funds which invest in consumer goods clocked an impressive average return of 6.4 percent during the period, making them top gainers among equity funds, as the BSE (^BSESN : 16632.01 -222.92
) FMCG index rose 9 percent.
Banking, consumer goods and pharmaceutical sectors accounted for over 20 percent of stock funds' assets at September-end.
High exposure to oil & gas stocks hurt unit values as such stocks fell 10 percent with firms like Reliance Industries (RELIANCE.NS : 1045.95 -17.8) posting a fourth straight drop in quarterly profit.
JM Telecom Sector Fund fell 24.5 percent as stocks like Bharti Airtel (BHARTIARTL.BO : 283.65 +2.65
) fell more than a quarter and Reliance Communications (RCOM.NS : 166.6 -1.5) dropped over a third, on concerns about telecoms future profitability after they slashed tariffs.
The only positive performer in October was Birla Sun Life MNC Fund, helped by nearly 38 percent assets in banking, pharma and consumer stocks, according to ICRA Online data.
BOND, GOLD FUNDS
Indian fixed income funds investing in government securities gained 0.12 percent in October, but fell on a month-on-month basis, as bond yields gained 11 basis points, on concerns about government borrowing and rising inflationary pressures, analysts said.
The Reserve Bank of India held its key rates steady in its quarterly policy review on Oct. 27 but laid the groundwork for a rise in interest rates by ending some liquidity support measures. It also raised the statutory liquidity ratio (SLR) by 100 basis points to 25 percent.
Gold exchange traded funds gained 1.48 percent during the month as the yellow metal touched record highs boosted by festival sales in India and overseas cues.
Gold futures on the continuation chart ended October at 15,957 rupees per 10 grams, up 1.6 percent during the month after touching a record high of 16,066 rupees on Oct. 23.
(Reporting by Aditya Kalra, Editing by Ramya Venugopal)
(For more news on Reuters Money visit http://www.reutersmoney.in)
