November good for non-tech funds

Recommendation: Hold

Aarati Krishnan

NOVEMBER was a mixed month for the equity market, with the indices managing gaining around 8 per cent between October 31 and November 30.

Returns on the broad market indices, such as the BSE-200, more or less matched those from the narrow market indices such as the BSE Sensitive Index and the S&P CNX Nifty. The gains in the market indices, however, hide substantial gains in select cyclical stocks. So, how did mutual funds fare during the month? An analysis of point-to-point returns on NAV (after factoring in dividends) between the two dates:

Equity Funds: The majority of diversified funds trailed the market returns over the month, with just 9 out of 58 funds managing to outperform the market return of 8 per cent. Even the funds that did beat the index did not outperform it substantially.

GIC Mutual Fund's G-Mat topped the gainers list with returns of just over 10 per cent, while Kotak Mahindra's K-30, Zurich India's Top 200 Fund and Kothari Pioneer Bluechip Fund (Growth Option) followed close behind with marginally lower returns. Not surprisingly, Franklin India Index Fund was among the top five funds in terms of returns.

Birla Advantage Fund had the lowest returns during the month actually losing some value. SBI Magnum Multiplier Fund, Magnum Equity Fund and Reliance Growth Fund were also laggards in terms of returns. This was a month in which select stocks in cyclical sectors such as steel, cement and petrochemicals fared well. Further, expectations of benefits from PSU divestment pushed up the battered valuations for some PSU stocks.

Exposures to top-rung IT stocks such as Infosys and Wipro, combined with allocations to cyclicals such as cement and steel, appear to have helped the top gainers beat the broad market. Funds which have fairly high concentration in the top holdings appear to have fared better than funds which have a low degree of concentration.

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Sectoral funds: Sectoral funds trailed the market indices over November. The top-performing sectoral funds SBI Magnum Contra Fund and K-MNC managed returns of just over 8 per cent, matching the market returns. But the other sectoral funds trailed the market.

Funds with heavy exposures in such cyclical sectors as steel and cement did well, which is why funds such as the Magnum Contra Fund and Alliance Basic Industries Fund figure among the top sectoral funds. K-MNC benefited from its exposures in top rung pharma and FMCG stocks which made some gains during the month. With FMCG companies coming in for some defensive buying, FMCG funds that were invested in the top-rung stocks outperformed other sectoral funds.

The Kothari and Prudential FMCG Funds, each recorded returns of around 7 per cent over the month, with Alliance Buy India Fund also managing similar returns. However, Magnum FMCG Fund, which is invested in smaller FMCG companies, lagged in terms of returns. Infotech funds put up a poor showing, with no technology-oriented fund managing returns of more than 5 per cent.

Exposures to mid-sized technology companies and media stocks could be behind this performance. Sun F&C Emerging Technologies Fund managed the best performance among the tech funds, with Kothari Pioneer Internet Opportunities Fund and Kothari Pioneer Infotech Fund following suit. Birla IT Fund was the worst performer among the sectoral funds with negative returns of around 2.8 per cent.

Income Funds: Income funds put up a reasonable showing last month, with 45 out of 82 funds recording annualised returns of over 12 per cent. PNB Debt Fund, followed by Templeton India MIP, Kothari Pioneer Income Builder Account managed to top the gainers list with returns in excess of 1.4 per cent over the month. Jardine Fleming Bond Fund, Zurich India High Interest Fund and LIC Bond Fund had the lowest returns.

Balanced Funds: Though the top performing balanced funds fared reasonably well, balanced funds as a class did not put up an impressive show during the month. Just 7 out of 29 balanced funds outperformed the returns on a balanced benchmark comprised 60 per cent of equities and 40 per cent of debt.

GIC Balanced Fund topped the list followed by Cantriple, Zurich India Prudence Fund and K- Balance. Birla Balance, Prudential ICICI Balanced Fund and Franklin India Balanced fund turned in the lowest returns.

Fund wise performance: Zurich Mutual Fund and Kotak Mahindra Mutual Fund appear to have turned in good performance across both the equity and balanced fund categories. Their schemes figure in the top five in both categories.

GIC Mutual Fund appears to have made a comeback of sorts, with its funds topping the growth and balanced categories. Birla Mutual Fund, on the other hand, appears to have slipped up in its performance. Its funds turned in the lowest returns in diversified, balanced and sectoral categories.