The Hindu Business Line : One out of three funds outpaced the Nifty

Those who invested in equity funds benchmarked to the index 14 months ago (May 22, 2008, when the Nifty was at the same 5000 level) may find that only 16 of the 50 schemes have outpaced the index on a point-to-point return.

However, the performance of number of schemes has improved in recent months. Over three- and six-month periods, 20 of the 50 schemes outpaced the Nifty.

With mid-caps participating actively, funds that invested in stocks outside the Nifty basket improved their performance.

Funds with higher exposures to the metals, banking, construction and technology sectors generated better returns, while funds that moved into defensives such as FMCG performed moderately over the six months.

The return divergence between the best and worst funds in the category was huge.

ICICI Pru Discovery generated a point-to-point return of 25 per cent (May 22, 2008 to September 16, 2009) while JM HI FI was the worst performer for the same period, losing 51 per cent of its value.

ICICI Pru Discovery was the only fund to consistently better the benchmark over the 14 months.

Mixed bag

The performance of infrastructure theme-based funds was a mixed bag over the six-month period, with Birla Sun Life Infrastructure and DBS Chola Infrastructure Fund generating over 100 per cent returns, while ICICI Pru Infrastructure and Escorts Infrastructure trailed the benchmark, recording returns of 75 per cent and 60 per cent respectively for the same period.

One general trend observed is that most funds did not confine themselves strictly to their benchmarks while selecting stocks.

Typically, funds invested at least 30-40 per cent of their assets in large-, mid- and small-cap stocks outside the Nifty basket, depending on the scheme’s mandate.

For instance, ICICI Pru Discovery has a mandate of investing in ‘value’ stocks and 68 per cent of the scheme’s assets are invested in stocks with market capitalisation less than Rs 6,500 crore.

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