After a lacklustre year in 2011, diversified equity funds have made a quick comeback in the last six months. This is evident in their six-month returns as against the less inspiring one-year returns. While diversified equity funds, on an average, lost 5.5 per cent in the past 12 months, they have gained 4.75 per cent in the last six months.

Mid-caps shine in 2012

Half the top performers of the last six months are nowhere near the top in the one-year return chart. Take Canara Robeco Emerging Equities. It is among the top in the six-month performance chart but was way below in the one-year return list. Ditto with funds such as IDFC Sterling Equity, Franklin Smaller Companies or Principal Emerging Bluechip. These funds, focused on mid- and small-caps, have benefited from the rally in mid-cap stocks in the last six months.

The Nifty gained about 2.2 per cent in this period while the CNX Midcap Index, the benchmark for these funds, rose by a higher 2.9 per cent.

However, the one-year picture tells a different story. Large-cap-oriented funds such as ICICI Pru Top 100 and Quantum Long-Term Equity, along with UTI Opportunities, creep into the charts.

With the Sensex falling by 5.7 per cent in this period, these funds have managed to contain losses, inching up by about 2-3 per cent.

Winners throughout

Funds such as Magnum Emerging Businesses, BNP Paribas Mid-cap, ICICI Pru Discovery and Reliance Equity Opportunities appear in the top ten across both time frames.

A high cash holding in wavering market conditions has come to the aid of the Emerging Businesses fund.

From about 8.5 per cent in July 2011, this fund’s cash holdings moved up to about 19 per cent by March 2012. It is only in the last 3-4 months that it has come back to the 8 per cent levels.

At a time when most diversified peers stocked up on ‘defensive’ FMCG stocks, Reliance Equity Opportunities has managed a strong show without it.

The fund’s exposure to non-durables was less than 1 per cent throughout this period. But holdings in another defensive sector, pharma, have stayed at around 15 per cent during the last one year.

The laggards

Although one-year returns are healthy, during the last six months, large caps have clearly underperformed. Quantum Long-Term Equity or Canara Robeco Large Cap + are good examples of this.

While the top performing funds over the last six months returned up to 13 per cent, these funds managed only about 3-4 per cent gains.

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