Mid- and small-cap mutual funds have been worst affected by the market fall of the last six months. It may be recalled that for almost ten months until then, the mid-cap funds had been beating both the Nifty and Sensex.
Of the top ten worst performing funds for the last six months, seven are mid- and small-cap focussed funds; they gave returns in the range of -26.8 per cent to -20.8 per cent. (A total of 298 schemes have given negative returns in the last six months.)
This was expected as the indices themselves have given negative returns, say analysts. However, some fund managers feel that the fall in the markets in itself was a bit exaggerated. Some good quality stocks had to bite the bullet as investor sentiment turned against them. With falling markets, many a good company stock was dumped by investors, believe analysts.
Poor performance
JM Small & Mid-Cap Fund saw the most negative returns at -26.8 per cent; 60 per cent of the fund portfolio consists of mid-cap stocks and 18 per cent small-cap stocks. Another factor for the fund's poor performance could be its high exposure to the auto sector which has given negative returns of about 6.39 per cent during the last six months.
Taurus Discovery fund, which had a reputation of being one of the best performing mid-cap funds until six months ago, also features in the list of the ten worst performing funds over the last six months. This fund had been showing consistent performance for the last three years giving annual returns of about nine per cent. However, this fund in the last six months has given returns of -21 per cent. This fund has a well-diversified portfolio of stocks.
Sentiment-driven
Stock picking may not be the reason behind the poor performance; it could be the fact that the good quality stocks had been battered due to market sentiment, said analysts.
The BSE Sensex lost around eight per cent over the same six month period, while the BSE Midcap Index decreased by 18 per cent and the BSE Smallcap index fell by 22 per cent.
However, most fund managers seem to have taken this lean period in their stride. As one fund manager put it, “It is all part of the cycle. If you have periods of good performance, then you will also have times when the returns are low. Also, six-months is too small a time period to look at these funds and their performance.”