The Hindu Business Line : Diversified equity funds return 115% in a year

Since March 9, 2009, (when markets touched their lows), when all class of investors were pessimistic about the market movement owing to the continuous flow of negative information, the markets have rebounded spectacularly, more than doubling in the period.

The average return of diversified funds was 115 per cent. Of 290 diversified schemes, 89 of them have clocked return in excess of 115 per cent and 125 of them outpaced the BSE Sensex.

For the same period the bellwether BSE Sensex moved up by 105 per cent (index on March 9, 2009 was 8160) and S&P CNX Nifty by 95 per cent.

Returns

It has been a year of golden returns for equity and mutual fund investors.

Investors who preferred to route their cash through mutual funds were laughing all the way to the bank, with some of the schemes clocking a returns of between 150 and 200 per cent.

Those who had faith in the market and bought, when others were in fear, made merry. But the return divergence was wide between the best in the diversified funds category and the worst.

Principal Emerging Bluechip was the top performer with a return of 201 per cent over the last one year.

The fund was launched in October 2008 – close to bottom of the market – and its performance was aided by sheer selection of stocks and sectors.

Others who shared the honours were Magnum Emerging Business with 193 per cent, Taurus Infrastructure and ICICI Pru Discovery with 185 per cent returns.

Among those who missed the rally were JM HI FI, Religare AGILE and HSBC Dynamic. They have let down their investors with a poor return of 45-60 per cent.

What clicked

The most common theme among the performers was that they all stayed invested during the market correction and they all had sizable exposure to mid-cap stocks.

All the “outliers” held cash less than 15 per cent of the total assets in March 2009, the period when the market was undergoing a turnaround.

They had well diversified portfolios. Most of them also invested in sectors that witnessed and indeed led a tremendously rally.

Principal Emerging Bluechip was overweight on banking, Magnum Emerging had invested 22 per cent of the assets in construction and projects, while Taurus Infrastructure was over weight on construction and power. ICICI Pru Discovery, the value fund, was overweight on banking and pharma.

Surprisingly they all have invested less in the software sector. The BSE IT index clocked 155 per cent over a one year period.

Laggards

JM HI FI was overweight on cement and invested 20 per cent of its assets there. HSBC Dynamic has invested in banks, consumer nondurables, pharma and software but what made the difference was that it had invested predominantly in large-cap stocks that rallied less than mid-caps .