Indian fund investors have missed large part of the surge in domestic shares in the last one month and may be in for more disappointments as their fund managers sit tight on a multi-year high cash levels.
India’s benchmark index fell to its lowest level in 2009 on March 9,but has surged almost 30 per cent since then,helped by a revival in global risk appetite and some flow of funds into emerging markets,including India.
However,nearly 300 diversified funds have seen their net values rise by an average 20.2 per cent,held back by unusually high cash levels,with only nine of them rising more than the main stock index,data from global fund tracker Lipper showed.
“These cash calls would certainly impact fund returns once the market bounces back,which we saw in March,” Chintamani Dagade,a senior research analyst with Morningstar India,said.
He said most of the large-cap diversified stock funds held double digit cash levels throughout 2008 in a bid to soften blow from falling shares,which went on to end the year down more than 50 per cent,their sharpest fall on record in any year.
However,the strategy did not work for most funds.
Net asset values of stock funds recorded their worst annual fall of 54.7 per cent during the year,giving up the entire gain made in the previous two calendar years,with nearly half of the actively managed funds also underperforming the benchmark index.
Most funds continue with the strategy and some have raised the cash levels further ahead of general elections in April-May,anticipating a volatile share market,resulting in a major underperformance in the last one month.
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