Cash, bank shares ease blow for India funds in Sept

Cash, bank shares ease blow for India funds in Sept

Mumbai: Net values of India’s actively managed diversified stock funds slumped in September, but most of them outperformed the benchmark stock index, cushioned by cash and a softer fall in bank and energy stocks.

Net asset values of these funds, the biggest group of stock funds by assets and number, fell 11.5% on an average, data from global fund tracker Lipper showed. Nearly 57% of them lost less than the 11.7% slump in the main stock index.

In August, diversified stock funds posted positive returns but a majority fell short of beating the benchmark index.

“One of the key reasons for funds outperformance of broader indices is higher cash levels," Krishnan Sitaraman, head of fund services and fixed income research at CRISIL, said.

Large exoposure to banking stocks, which lost less, and fund managers raising their cash levels, would also have helped minimise the downside, he added.

India’s diversified equity funds held 11.34% of their assets as cash on an average at the end of August, data from fund tracker ICRA Online showed.

This softened the blow from sharp falls in their large bets on mid and small-cap stocks and from the metals and information technology sectors.

Funds invested about 40% of their assets in mid-cap and small-cap stocks, which fell 16.44% and 19.07% respectively in September, in a market pressured by foreign portfolio outflows and the U.S. credit crunch.

They also held over 13% of equity assets in metal and tech sector stocks, which lost 27.18% and 21.97% on fears of a slowing global economy.

Sector funds investing in the shares of tech firms lost an average 17% of their portfolio values, the sharpest in a fund category of Lipper in India.

Banking and capital goods stocks, the two most preferred sectors for diversified funds with more than a quarter of their assets, lost less than the benchmark index in September, limiting the decline of equity funds that shed 42% this year.

Among other categories, gold exchange traded funds rose 14.2% as the yellow metal rallied.

On the Multi Commodity Exchange (MCE) of India’s continuation charts for gold futures, gold prices surged 11% in September on depreciating rupee and with investors seeking safety in the metal from global economic turmoil.

Returns from money market funds jumped to 0.74% in September from 0.66% during the previous month as short-term rates spiked well into double digits on tight liquidity in the banking system.