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According to a report by Morningstar Research, domestic mutual funds made a net investment of Rs 2,524 crore in equities in August, the highest in a month for over three years. The highest that these funds had earlier invested (in the net) was Rs 3,179 crore, in June 2008.
However, in August, domestic equity funds also saw the worst monthly returns since January 2011.
The mid- and the small-cap category stocks lost more than the large-cap stocks in August. The benchmark sensitive index lost 8.4 per cent in August, while the BSE Mid-Cap and BSE Small-Cap indices lost 9.3 per cent and 14.1 per cent respectively.
The Morningstar India Large Cap Category delivered negative returns of 7.8 per cent, while the Morningstar India Small/Mid-cap Category gave negative 7.6 per cent. In January 2011, the same categories returned -9.7 per cent and -10.5 per cent respectively.
Worst performers
Among sector funds, banking and technology funds were the worst performers in August with these categories falling by more than 12 per cent during the month. “Technology stocks were battered on the back of concerns of a global economic slowdown, while banking stocks also took it on their chin with inflation and rate-hike fears still looming large,” said the report.
The Morningstar FMCG category fell by 3.1 per cent as compared to the BSE FMCG index which fell by 3.5 per cent in August.
Of the mid- and small-cap equity funds, about a quarter of them underperformed the category benchmark index. These funds, which are benchmarked to the CNX Midcap index, saw a sharp decline in August.
ETFs' good show
With gold prices rising touching an all-time high in August, gold ETFs also registered the highest ever monthly return of 15.2 per cent on an average during the month.
“This is the highest monthly return delivered by these funds since their inception in early 2007, and even topped the return of 14.2 per cent delivered by the category in the month of September 2008, amidst the financial crisis,” added the report. Gold prices touched an all-time high of Rs 28,230 per 10 grams on August 20, 2011.
A slight decline in headline inflation from 9.44 per cent in June to 9.22 per cent in July led to the 10-year bond yield falling by 12 basis points in August.
The decline in US treasury yields would have also had “downward pressure on bond yields in India” said the report. The Morningstar India Long Term Government and Intermediate Government categories delivered returns of 1.1 per cent each in August, while the Morningstar India Intermediate Bond category followed close behind with a return of 0.9 per cent.
The report also said that the average maturity across all bond fund categories rose in the month of July, with mid- and long-term bond / gilt funds seeing a higher increase.
The average maturity of long term gilt funds increased to 7.1 years at the end of July 2011, from 4.1 years at the end of the previous month. Similarly, for intermediate bond funds, the average maturity rose to 3.6 years at the end of July 2011, from 2.9 years in the previous month.
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