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Sharvari Patwa

Mumbai, Sept. 22 Only three months ago, Indian mutual fund houses were pushing global funds as a means by which the Indian investor could get some returns from the bull run in emerging markets.

However, schemes with a global theme have fared worse than equity diversified schemes. For the three months ending September 19, the earlier have showed negative returns averaging 14.8 per cent, while the latter’s negative returns average 9.40 per cent.

Global funds invest in stocks overseas and across emerging and developed markets, which have fared badly in the past couple of months, said Ms Mallika Baheti, mutual fund analyst, Sharekhan Ltd.

There has been a sharp downturn in Brazil and Russia in the past couple of months, while India has relatively outperformed these markets, said Mr Satish Ramanathan, Head of Equities, Sundaram BNP Paribas AMC.

Most of the global funds had invested in Russia and Brazil with a view that commodities would do well there, but later, there was a fall in prices of commodities such as crude and this affected their performance, said Mr Ramanathan.

The Indian stocks benchmark, the Sensex, dipped by 6.93 per cent during the past three months ending September 19, while Brazil’s IBOV fell by more than 23 per cent. Russia’s RTSI fell by 47 per cent, Indonesia’s Kospi declined by 16 per cent and Taiwan’s TWSE fell by 26 per cent during the same period.

Out of the 21 global funds on which data was available, according to Value Research, more than 90 per cent have fared worse than the average equity diversified scheme.

Only a couple of months ago, India was in the underweight category and Brazil and China were considered overweight, said analysts. But the story panned out very differently. While India mostly imports commodities, countries such as Brazil and China export them and so they were affected much more than India by the economic slowdown, said analysts.

Among the funds that have fallen substantially in the past three months are Kotak Global Emerging Market (30.63 per cent), Principal Global Opportunities (29.06 per cent), Sundaram BNP Paribas Global Advantage (23.92 per cent), DSPML World Gold Fund (22.68 per cent), HSBC Emerging Markets (21.64 per cent) and AIG World Gold Fund (18.83 per cent).

Indian markets fared better than other markets as domestic demand, especially from insurance companies, helped reduce the losses in stock markets, said Mr Ramanathan.

Another concern, according to a fund manager, is that with trouble in their own homes, the US is pulling out money from the emerging markets. This means that money is getting scarce in emerging markets, and as a result of liquidity crunch these markets are tumbling badly, he added.

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