The Hindu Business Line : Index funds hit by shaky markets

A teetering stock market is fast cutting a swathe through index funds, a category that has been gravely hit by the uncertainty that is now showing itself quite plainly.

Index funds, each of which mirrors a certain index without attempting to outperform it, have over the past week or so lost close to 2 per cent on an average, the descent steeper than what is seen in the case of actively-managed diversified equity funds. The latter have, for the seven-day period ended July 31, lost about 1.4 per cent.

Declining Trend

Index funds, which have generally trailed their actively-managed counterparts, may well lose fresh ground if the declining trend continues, mutual fund sources suggest, adding that the frontline indices have, on two specific trading sessions during this seven-day stretch, lost heavily.

The reference is clearly to the 541-points drop in the Sensex on July 27 (last Friday) as well as to Wednesday’s decline of 615 points. While the market did recover somewhat between the two dates — especially on the day the RBI announced its credit policy — the impact of the plunge is being felt clearly, it is argued.

The current scenario does not mark a departure from the trend that has normally favoured diversified equity funds. These, over a three-month period ending July 31, have provided 14.03 per cent, according to Value Research. In comparison, index products have produced 11.97 per cent.

Incidentally, the one-year performance figures are also different: 48.5 per cent by actively-managed funds and 43.88 per cent by the index trackers. On a one-year basis, some of the better performing index funds (not exchange-traded funds) are managed by ICICI Prudential, UTI and Franklin Templeton. These have given about 44-45 per cent each. Only the Nifty-trackers are being considered here.

As for the Sensex-trackers, the better performers include products offered by UTI, Franklin Templeton, Tata and Reliance. Their returns have varied between 42 per cent and 44 per cent.

On Wednesday, a day when the Nifty dropped 4 per cent or so, index heavyweights (in terms of turnover) lost considerable ground. Turnover topper Reliance, for instance, declined 5 per cent. Reliance Communications too recorded a similar drop. ICICI Bank and SBI, which occupy the next two slots, fell by 3.9 per cent and 4.6 per cent respectively.

More Stories on : Mutual Funds | Stock Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Four-wheeler sales post double-digit growth in July

Binani Cement to invest $100 m in Chinese co

Earnings of Sensex cos grow 35% in June quarter

Rupee appreciation dents export growth sharply in June

Bird flu: Threat of glut haunts poultry sector

Index funds hit by shaky markets

Govt mulls raising FDI cap in PSU refineries

Cisco sees huge scope for SMB products

Liquid milk helps in dairy industry growth

Sensex down 600 pts on global worries

Brokerages take preventive step to ward off margin call threat

West Coast Paper: One more price hike

‘1-year deposit rates may hold at 8.5%’

Is the retail investor always on the losing side?

BSNL union opposes VRS