Mid-cap, thematic funds still lagging behind

Nilanjan Dey

Meltdown notes


Large-cap

funds, on an average, delivered a negative 4.33 per cent compared to a negative 11.49 per cent provided by mid-cap counterparts.

Funds oriented

towards large and blue chip stocks gained significantly after June 14

Kolkata, Oct. 26

Large-cap equity funds have come out tops during the entire decline-to-rebound period, beginning May 10 when the market crashed and ending roughly in the middle of October. A selection of these funds have, on an average, delivered a negative 4.33 per cent compared to a negative 11.49 per cent provided by their mid-cap counterparts.

Funds oriented towards large and blue chip stocks have gained significantly during the upward movement recorded by the indices after the declining trend started reversing at around June 14, a review of equity funds' performance has shown.

The observation that large-cap funds have beaten most of the other categories draws strength from the fact that their portfolios are made up of frontrunners, many of which have emerged as smart performers during the latest rally. In contrast, mid-cap counters (which had ended up as the star achievers during the previous run) have relatively under-performed this time.

At the backdrop of the review, done by fund distribution company SKP Securities, is the trail left by the Sensex, which had its earlier peak at 12,612 points on May 10 and had come down to 8,929 points on June 14. It again clawed its way back seen as a strong come-back to over 12,700 points on October 13, the critical date as far as the review is concerned.

As far as the overall performance is concerned, that is, during the entire period (May 10 to October 13), large-cap funds delivered a negative 31.38 per cent on an average between May 10 and June 14. These recovered by 39.48 per cent between June 14 and October 13.

Mid-cap funds, however, gave a negative 35.12 per cent during the first period and 36.56 per cent during the second. Thematic funds, on the other hand, recorded a negative 33.3 per cent and 39.12 per cent respectively during these two periods.

Within the large-cap sphere, too, many stocks were trailing behind their previous peak scaled in May, SKP Sec has mentioned, adding that 30 of the 50 stocks in Nifty and 13 of the 30 stocks in the Sensex were below their May 10 levels. Interestingly, broad based equity funds that are diversified across all market caps have generally under performed. Between May 10 and October 13, these diversified funds have scored an average of minus 5.02 per cent.

"During the May 2006 meltdown, blue chips fell, but small- and mid-caps took a greater plunge. The recovery thereafter saw the large-caps moving up. Now, with a large gap between the valuations of large and mid/small caps, the latter may do the catching up act, leaving a good wealth creation opportunity in the process," the reviewers said.

(This article was published in the Business Line print edition dated October 27, 2006)
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