Will MFs give positive returns in FY08?
Answering the most important concern in everybody’s mind.
There is some research done in this area, we present you a detailed report.
Q4 losses fail to wipe out previous gains.
Those investing in stock markets through mutual funds may have a reason to rejoice, as losses suffered in January-March period pale before the huge positive returns in the previous three quarters, a report said
According to an analysis by Value Research, a mutual fund tracking firm, the 'diversified equity' schemes that are most popular among investors lost an average of 28.3 per cent in the past three months.
However, over the past year, fund performance has remained strong and the losses of the last quarter have not come even close to wiping out the previous three quarters gains, the report said.
Funds in the diversified equity category gained an average of 21.4 per cent over the four quarters in FY08, with individual schemes returns ranging from a gain of 53.7 per cent to a loss of 7.9 per cent. Just four funds in the category have registered losses for the financial year.
Analysts believe investing in diversified schemes could still provide better exposure to investors, despite the market meltdown. Individual funds in the diversified equity category lost between 40.6 per cent and 16.2 per cent in the final quarter of last financial year, when the BSE Sensex and the NSE Nifty both lost 22.9 per cent.
"Of the small number of funds that beat the benchmarks handsomely, a majority are those that also invest abroad. This demonstrates the value of true diversification in bad times," Value Research CEO Dhirendra Kumar said.
However, international funds also lost investors' money but it was less than domestically-focused funds. Kumar added.
Among sector-specific fund categories, the small FMCG and pharma categories managed to fare better than the mainstream funds, which lost an average 16.7 per cent and 18.9 per cent respectively.
"The sharpness with which equity fund performance collapsed in the quarter shows that fund managers generally failed to take any defensive posture. Far too many funds had under-diversified portfolios that were heavy in hot sectors such as real estate, infrastructure and banking," Kumar said.
While the equity schemes suffered because of the subdued secondary markets, even the debt-based funds did not fare too well in the previous quarter.
Worsening inflation numbers and the resulting uncertainty on the interest rates have resulted in average returns of funds in the Gilt (medium and long-term) category lose by 1.1 per cent during March, the analysis shows.