Mutual Funds: Yearly Performance

While the overall performance of mutual funds has been quite optimistic for FY13, the FMCG sector, Large-Cap stocks and SBI mutual funds have clearly excelled, says Shashikant

A periodic performance review of your investments is pivotal for better investment decisions. The end of any financial year provides you with this opportunity. Mutual funds being important investment tools that help you attain your financial goal, are no exception and should be reviewed periodically to churn your portfolio. This will help you optimise your returns. To assist you in evaluating your investment returns, we are scrutinising the performance of the equity diversified funds for the financial year ending March 2013. Following is an analysis of these returns and the sectors or fund houses that have performed well along with a study of how the returns based on the market cap have shaped up in the last one year.

Overall Performance

We have considered only those equity diversified funds that have completed one year of existence including the funds falling under Equity Linked Savings Scheme (ELSS). Altogether, there were 392 schemes that we studied. The average and median return provided by these funds in the last one year is 6.85 per cent and 8.54 per cent respectively. However, the BSE Sensex in the same period has given a return of eight per cent. 

Out of 392 schemes, 62 schemes generated a negative return during the year while 330 funds were able to give a positive return. The best return was provided by the SBI FMCG fund standing at 36.87 per cent while the worst performer was Escorts Infrastructure, whose value fell by 23.99 per cent during the year. There are 181 funds that have underperformed the BSE Sensex and 211 funds that have outperformed the index.

The schemes with a mandate of investing in the FMCG sector have continued to do well. The average return provided by these funds is 30.82 per cent. The other major sectoral funds are Pharmaceutical, Technology and Banking sectors giving an average return of 20 per cent, 13.28 per cent and 10 per cent respectively. We compared these schemes’ performance with the respective BSE indices to check whether it is the knack of selecting the winning stocks that has helped this performance or the overall better performance of the sector has aided the schemes in riding the tide. We found that in some cases, better performance of the sector has helped funds perform, barring FMCG and Banking sectoral funds that have underperformed their respective indices. 

All the sectoral funds have given a positive return except for the infrastructure funds that continued to give a negative return. There are 28 infrastructure funds that have given an average return of - 5.19 per cent.

Market Cap

In the last financial year ending March 2013, Mid-Cap and Small-Cap indices have given negative returns while the Large-Cap index, represented by Sensex and Nifty has given positive returns. For instance, the BSE Mid-Cap and the BSE Small-Cap has declined by three per cent and 13 per cent respectively during FY13. However, a similar performance is not visible in the small and Mid -Cap schemes. On the contrary, they have given positive returns. In the Large and Mid-Cap sections 72 funds have provided a return of 8.5 per cent and 58 funds under the Mid and Small-Cap section have given a 7.35 per cent return. 

One reason for such a contradictory performance might be due to profit booking by the mutual funds in the last quarter of FY13 after good gains in the first nine months of FY13. For example, the BSE Mid-Cap was up by 12 per cent in 9MFY13 and in the final quarter of FY13, it fell by a huge 14 per cent. Mutual funds sold shares worth Rs 7404 core in the last quarter of FY13. Another reason for such a diverse performance is a huge drop in the share prices of some Mid-Cap shares like HDIL, Core Education & Technologies, Delta Corp etc. that brought down the entire index. However, the fact that fund managers have been able to beat their respective indices is praiseworthy.

Fund Houses

When it comes to the performance of asset management companies (AMCs), Axis mutual fund was the best performer among the 46 fund houses. The average return given by its three schemes is 17.64 per cent. However, SBI Mutual fund gave the best performance in the category of AMCs having a large number of schemes (more than 10 schemes). The 16 equity diversified schemes run by the AMC has provided an average return of 11.75 per cent. This is followed by Franklin MF and ICICI Prudential, generating average returns of 11.32 per cent and 10.05 per cent respectively. If we are to point out one AMC that has performed the worst in the last year, the dubious distinction is held by Sahara MF. There are 12 schemes under this AMC, and has given a negative average return of one per cent. Barring one of the funds dedicated to banking and financial services, all the funds have underperformed the broader market returns.

Conclusion

Although the median returns provided by mutual funds in FY13 are better than the returns provided by the broader market index, the industry lost more than 32 lakh investors measured in terms of individual folios from April 2012 to January 2013. However, if the industry continues to perform, it will naturally attract new investors all along. For FY13, the performers were definitely the FMCG sector, Large-Cap stocks and SBI mutual funds while the laggards were the infrastructure sector and Sahara AMC.