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Pharmaceutical and FMCG-focussed mutual funds have been the best performers in May, while the banking sector funds have performed the worst.
According to data on Valueresearchonline.com, pharmaceutical and FMCG sector funds saw returns in the positive whereas all the other sectors have given around one per cent returns or even negative returns in the month of May.
Reliance Pharma was the best performing fund in the sector with 2.77 per cent returns in May. SBI Magnum Pharma was the second best with 2.33 per cent monthly returns and UTI Pharma & Healthcare was third with 1.45 per cent monthly returns.
The best performing FMCG fund was Franklin FMCG with 3.62 monthly returns, followed by SBI Magnum FMCG with 0.9 per cent returns and ICICI Prudential FMCG with 0.8 per cent.
Banking funds were the worst performers with all funds giving returns in the negative and underperforming even the indices. The best performing banking fund in the sector was ICICI Prudential Banking and Financial Services, which gave -3.09 returns followed by Religare Banking Fund and Religare Banking ETF with -3.32 per cent and -3.79 per cent monthly returns.
Fund analysts attribute this to two factors: Rising interest rates and falling markets.
Rising interest rate scenario makes banking and automobile stocks jittery. The RBI has been increasing interest rates to contain growing inflationary pressure. In such a case, interest rate sensitive sectors such as banking and automobile take a hit.
In the last one month the BSE banking index, BANKEX, fell by -2 .04 per cent, while the BSE auto index fell by -5.6 per cent.
“The poor market performance has resulted in the adoption of sector rotation strategy among fund managers. The rising interest rate scenario has shifted focus onto the defensive sectors,” said Mr Kaushik Dani, Head – Equity, Peerless Mutual Fund.
The focus is slowly shifting to defensive sectors such as FMCG and pharmaceuticals. These are largely consumption-driven sectors and not affected by increasing interest rates.
During May the BSE pharmaceutical index, BSE HC, gave 2.6 per cent monthly returns and the BSE FMCG index gave 3.21 per cent monthly returns. The returns given by the pharma and FMCG funds were in the 0.5 per cent to 3 per cent range.
In May, the Sensex fell by 2.6 per cent, and the Nifty fell by 2.48 per cent.
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