Equity funds hit 15-month low

Equity mutual funds (MFs) posted their worst performance in 15 months in February on the back of poor show in banking, small and mid-cap stocks. Equity MFs, which do not invest in specific sectors , lost over 6% during the month, the worst monthly performance since November 2011. Diversified equity MFs fell 6.1% in February. Popular fund categories including diversified equity MFs lagged the benchmark indices such as the Sensex and Nifty during the month.The Sensex and Nifty declined 5.2% and 5.7% respectively during the month.
Funds that invest in banking stocks were the worst performers in February falling 9.6% on an average for the month. The BSEBankex was down 9.4%. Equity MFs, which have exposure to small and midcap stocks, were among the biggest losers. However, their losses were lower than their benchmark indices. While these funds declined about 7% on an average, the small and mid-cap indices slumped 9.6% and 12.4% respectively during the month.
"Sectors related to investments came under (selling ) pressure. Funds had taken higher exposure in sectors such as public sector banks and capital goods," says Gopal Agrawal, CIO, Mirae Asset Global Investments India. "Equity funds have been increasing their exposure to rate sensitive sectors such as banking and infrastructure. Since they were among the worst performers , equity funds were hit," says Dhruva Raj Chatterji , senior research analyst , Morningstar India, an investment research firm. Equity funds increased their exposure to mid-cap stocks from 34% in August to 37% in January. While this worked well for equity funds in 2012, it impacted performance in February, he says.
All the 580-odd equity MFs that do not invest in any specific sectors ended the month in the red. Only funds that invest exclusively in stocks of information technology companies managed to post gains in February . The markets have raced ahead ever since the government announced a slew of reform measures aimed at reviving slowing growth in September last year. Equity funds recorded over 8.4% gains during the month, the best in nine months on the back of a strong rally in the markets.
Stock markets snapped their three month winning streak in February as investors booked profits ahead of the Union Budget. Incidentally , the benchmark indices hit a two-year high only in January as foreign investors continued to pump money into the markets after buying a net $24.4 billion in Indian stocks in 2012, the second highest ever.
Colossal slide
Funds that invest in banking stocks were the worst performers in February falling 9.6% on an average for the month The BSE-Bankex was down 9.4%. Equity MFs, which have exposure to small and mid-cap stocks, were among the biggest losers While these funds declined about 7% on an average, the small and mid-cap indices slumped 9.6% and 12.4% respectively during the month All the 580-odd equity MFs that do not invest in any specific sectors ended the month in the red Only funds that invest exclusively in stocks of information technology companies managed to post gains in February.