The Hindu Business Line : Index funds fare better than sector-based ones

Mumbai, Nov. 11 Most sector-based mutual fund schemes have fared worse than their index counterparts during the past six months. These funds might have performed worse than their corresponding indices as they are more diversified. Also, stock selection might not have been that prudent enough in some cases, said Ms Mallika Baheti, mutual fund analyst at Sharekhan Ltd.

On an average, the category returns of banking sector funds have been negative to almost 30 per cent in six months, while the BSE-Bankex fell by around 16 per cent during the same period. In the case of technology-based funds, the category average was a negative return of almost 42 per cent, while BSE-TECk and BSE-IT had fallen 33 per cent and 34 per cent, respectively.

While ICICI Prudential Technology fund has given a negative return of more than 50 per cent in the past six months, Birla Sun Life New Millenium, a technology-based fund, has given a negative return of more than 40 per cent. DSPBR Technology.com has fared worse at 42.5 per cent negative return, Kotak Tech fared at a negative 41 per cent and Magnum IT fared at a negative 43 per cent, according the data on Value Research.

The funds investing largely in the FMCG space have on an average given negative returns of more than 27 per cent, while the BSE-FMCG index has fallen by 13 per cent.

ICICI Prudential FMCG has given a negative return of more than 35 per cent, the Magnum FMCG fund gave a negative return of more than 24 per cent and Franklin FMCG fund gave a negative return of around 22 per cent.

Some analysts feel that a larger exposure of these funds to mid-cap and small cap stocks would have dented the NAVs. The BSE-Midcap has fallen by more than 43 per cent in six months, while the BSE-Small cap has slipped by more than 45 per cent during the same period. The category average return of auto funds has been a negative at around 35 per cent, while the BSE-Auto has fallen by 33 per cent. The JM Auto sector fund has given a negative return of 39 per cent and UTI Transportation and Logistics fell by around 30 per cent.

The only sector-based funds that seemed to have outperformed their index counterparts are pharma funds, with category average returns of around negative 24 per cent, while the BSE-Healthcare index fell by more than 30 per cent.

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