The Hindu Business Line : MF equity schemes shine with returns of over 100 pc

AFTER a gap of over three years, the fortunes of the equity schemes of mutual funds have turned around due to the booming stock market with returns from a large number of growth (equity) schemes being over 100 per cent this year.

The returns are based on the net asset value of the funds during the year.

However, returns from the debt funds have come down to single digit this year compared to the double-digit returns seen in the previous two years due to falling interest rates.

What is more interesting is that more than 50 growth schemes of various mutual funds outperformedthe broader BSE 500 index. In the last one year, BSE 500 index provided returns of 95 per cent.

Even sector-specific funds have outperformed their respective indices, indicating better management of the portfolio.

A similar trend by the growth funds was seen in 1999-2000 mainly due to the rise in the technology stocks.

An analysis by IL&FS Investmart, a financial services firm, shows that the highest returns in 2003 was provided by Franklin India Prima Fund with returns of 162.83 per cent till December 19. This was followed by Tata Equity Opportunity Fund with returns of 152.50 per cent. Other funds with high returns includes, Sundaram Select Midcap Fund (147.84 per cent), Reliance Growth (142.30 per cent), Reliance Vision (140.15 per cent).

Mutual fund analysts said such high returns were due to the aggressive investments style of several fund managers and picking mid-cap and small cap stocks. However, they said such high returns are not sustainable from these levels, as stock prices have run up sharply in the last six months.

In the various categories of funds, diversified funds average returns of 35 schemes were 108.29 per cent. In mid-cap or speciality funds, the average returns were 83 per cent for 10 schemes. Among the sector-specific funds, average returns from technology funds were 55.80 per cent much lower than BSE 500 but higher than the BSE IT index returns of 18.5 per cent.

For MNC/FMCG funds, the average returns were 73 per cent this year and compared to this BSE FMCG index gained 33.21 per cent.

Even equity-linked tax savings scheme performed well with average returns of 110 per cent for 11 schemes in this category.

For index funds- tracking BSE Sensex and S&P CNX Nifty, the returns were in line with these two indices due to their passive investment style.

Due to good performance this year several mutual fund schemes have started paying higher.

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