New Delhi: India’s diversified stock funds posted their worst quarterly performance in nearly three years, as rising interest rates, slowing economic growth and global debt worries led to a fall in key stock indices.
Such funds lost an average 9.84% in the September quarter, their weakest quarterly performance since the October-December 2008 period when they fell over 20%, data from fund tracker Lipper, a Thomson Reuters company, showed.
The fall mirrored the drop in the benchmark index which declined 12.7% during the same period, the index’s biggest fall since shedding 25% in the December 2008 quarter.
“Capital goods and industrials were the biggest contributors to the poor performance of equity funds,” said Dhruva Raj Chatterji, senior research analyst, Morningstar India.
“Large-cap equity funds fell more than their mid-cap cousins during the quarter.”
Losses in the capital goods sector , which fell 22.7% in the quarter, hammered unit values as equity diversified funds had an over 20% exposure to this sector as of end-August, data from Morningstar India showed.
Metal stocks also contributed to the fall, as reflected in the BSE metal index which fell 27%.
Mutual funds were also hit by investments in financial services stocks, another favourite theme of managers with an over 20% allocation, as the banking index fell 15.4% on worries about slowing credit growth amid a rising interest rate environment.
Data showed that fund managers slowly increased their combined exposure to small- and mid-cap stocks in recent months to 36.5% of assets by end-August, their highest level since January 2011.
The move, however, did not help funds, as the BSE mid-cap index fell 10.6% and the small-cap index slumped 15.6% in the September quarter.
Among sectoral equity schemes, funds that invest in the IT sector fell 13.3%, tracking the 13.5% fall in the BSE IT index , while banking funds lost an average 15.3% in the quarter.
Gold exchange traded funds (ETFs) staged an impressive performance in the quarter, rewarding investors with an over 17% average return as global debt woes boosted the yellow metal’s appeal, sending prices higher.
Diversified equity funds fell 1.45% on average in September, nearly in line with the 30-share BSE index’s fall of 1.34% in the month, data showed.
Funds’ investments in capital goods and metals proved to be a drag on unit values, as the sectoral indices fell 10.82% and 9.1%, respectively, in September.
Gold exchange traded funds (ETFs), which were star performers in August, lost 3.4% in September as gold prices eased.
On the continuation charts, India’s gold futures ended the month at Rs 25,989 per 10 grams, down 4.4%.
“Fundamentally, nothing has changed on gold ... prices could go much higher,” said Chirag Mehta, fund manager - commodities at Quantum Asset Management.
Among debt schemes, funds that invest in government securities returned 0.26% in the month, Lipper data showed.