HOME > MUTUAL FUND > CITRUS ANALYSIS
  CITRUS ANALYSIS
MUTUAL FUNDS NEWS
Citrus Analysis: Mutual funds miss the latest rally
Thu, Jul 05, 2012
Source : Jeni Shukla, Citrus Interactive

With market regulator Securities and Exchange Board of India (SEBI) reading the riot act to asset management companies (AMCs) (“perform or you will not be allowed to launch new fund offers”), the performance of equity schemes is under scrutiny as never before. Despite this, most schemes appear to have missed out on the recent rally in the market between May 23 and June 30, 2012, as a recent study done by Citrus Interactive showed.  
Between February 21 and June 30, 2012, the Indian stock markets witnessed two phases: a downward phase from February 21 to May 23 in which the 30-stock benchmark Sensex lost 13.46 per cent, and an upward phase starting from the low reached on May 23 up to June 30 in which it notched up an incredible return of 9.29 per cent in just 40 days.



We carried out a study to assess the performance of 148 diversified equity schemes in both these market cycles. This set of funds includes all equity schemes except the ones in categories like thematic, sectoral and speciality funds.

Downward phase

Among the indices, Nifty Midcap 50 lost the most by plunging -20 per cent in the downward cycle. The CNX Midcap index fell the least – by -10 per cent – during this phase.  

The top-performing mutual fund schemes in the downward phase were:
 

15 Top Outperformers

Absolute return (%)

SBI Magnum Emerging Businesses

-0.82

IDFC Sterling Equity

-2.61

Birla SL India GenNext

-2.72

DSPBR Micro-Cap

-3.21

Principal Emerging Bluechip

-4.02

Canara Robeco Emerging Eq

-4.45

UTI Mid Cap

-4.5

UTI Wealth Builder-II-Ret

-4.91

SBI Magnum Global 94

-4.99

Reliance Long Term Equity

-5.16

Axis Midcap

-5.34

JPMorgan India Smaller Cos

-5.35

IDFC Premier Equity-A

-5.36

IDFC Premier Equity-B

-5.36

BNP Paribas Mid Cap Fund

-5.49

Sensex

-13.46

CNX Nifty 50

-13.76

(Returns are for period between Feb. 21 and Mar. 23, 2012)


Upward phase

In the upward cycle the Sensex was the best-performing index with a return of 9.29 per cent while the BSE Small Cap Index was the worst-performing index with a gain of only 4.9 per cent.

The best performers in this period were:
 

14 Outperformers 

Absolute return (%)


Escorts Leading Sectors

10.85


IDFC Equity-B

9.95


IDFC Equity-A

9.95


Baroda Pioneer Growth

9.93


ING Large Cap Equity

9.59


Pramerica Equity Fund

9.59


Taurus Star Share

9.51


HSBC Equity

9.49


ICICI Pru Top 200

9.37


Taurus Bonanza

9.37


BOI AXA Equity-Reg

9.34


LIC Nomura MF Growth

9.34


Birla SL Frontline Equity

9.33


BOI AXA Equity-Eco

9.32


Sensex

9.29


CNX Nifty 50

9.17


Returns are for the period between 23rd May and 30th June, 2012




Better in the downward phase

More schemes (119) outperformed the Sensex in the downward phase than in the upward cycle (14). The 119 outperformers of the downward phase represent 84 per cent of the total AUM of all the 148 schemes we studied. On the other hand, the 14 outperformers of the upward phase account for just 4 per cent of the total AUM.

Even the margin of outperformance was higher in the downward phase: the best-performing scheme in this phase, SBI Magnum Emerging Businesses, outperformed the Sensex by 12 percentage points whereas the best-performing scheme of the upward phase, Escorts Leading Sectors, beat the Sensex by just 1.5 percentage points.  

Moreover, many of the schemes that were among the top performers in the falling market turned out to be laggards in the rising market, and vice versa. For instance, Escorts Leading Sector fund, which was the best-performing fund in the upward phase, was ranked last but one in the downward phase. Similarly, Baroda Pioneer Growth, which was ranked fourth in the upward phase, was ranked 141st in the downward phase. SBI Magnum Emerging Businesses was ranked first in the downward phase but was ranked 141st in the upward phase. Many more funds displayed such contrasting performance.

Only six funds managed to beat the Sensex in both the cycles: Taurus Star Share(G), ICICI Pru Top 200(G), BOI AXA Equity-Reg(G), LIC Nomura MF Growth(G), Birla SL Frontline Equity(G), and BOI AXA Equity-Eco(G).

20 funds failed to beat the benchmark index in both the phases. This list includes several popular funds like HDFC Top 200, Reliance Equity, Templeton India Growth, DSP BlackRock Opportunities Fund, and IDFC Imperial Equity.

If we look at the portfolios of the outperformers, most of the 15 top-performing funds in the downward phase have higher exposure to mid- and small-cap stocks while all the top-performing funds in the upward cycle are large-cap funds (except Escorts Leading Sectors). The schemes which outperformed the Sensex in both the cycles are predominantly schemes with 80 per cent or higher exposure to large-cap stocks.

Clearly, the mutual fund industry missed the last rally in the markets with 96 per cent of AUM having underperformed the Sensex.

At a recent mutual fund summit, Sebi chairman U K Sinha highlighted the fact that at nine equity fund houses, 50-100 per cent of schemes have underperformed the benchmark over a three-year horizon. A Sebi official subsequently warned that fund houses whose schemes are consistent underperformers will not be allowed to launch New Fund Offers (NFOs). It is time AMCs took underperformance by their schemes more seriously.

You may contact the author at jeni.shukla@citrusadvisors.com

 
|
|
|
|
|
|
|
 
blog comments powered by Disqus
  RELATED NEWS >>