Top diversified equity mutual funds had a rough 2013 with half of the funds underperforming the benchmarks owing to sustained volatility and a lack of directional trend in the market.
An analysis of the top 50 equity funds that manage the most by way of AUMs shows that 25 (or 50%) of the these funds underperformed their benchmarks in CY13,data collated from Value Research show. In contrast,only 20-24% of these funds had underperformed in 2010,2011 and 2012.
The underperformers included HDFC Top 200,Reliance Equity Opportunities,Franklin India Bluechip,Reliance Growth,DSPBR Top 100 Equity Reg,UTI Dividend Yield,SBI Contra,Reliance Regular Savings Equity and DSPBR Equity.
UTI Infrastructure and Tata Infrastructure Plan A have emerged the top underperformers for the year,lagging their benchmarks by 17% and 16%,respectively. Others that lagged their benchmarks include DSPBR TIGER Reg (15.7%),SBI Emerging Businesses (12.5%),Reliance Regular Savings Equity (10.7%),HDFC Growth (10.6%),Reliance Growth (8.9%),SBI Contra (7.8%) and Reliance Vision (7.1%). HDFC Top 200,which alone manages more than R10,000 crore by way of assets,underperformed by 0.22%.
Experts say the market has become too volatile and outperforming during these times has become difficult. It was a testing year for fund managers owing to the sustained volatility. What made it worse was the acute polarisation with only a few sectors and stocks doing well, said Vicky Mehta,senior research analyst,Morningstar India.
Sectors such as FMCG,pharma and IT stocks have been holding up the market in the past few months,said experts. BSE FMCG,BSE Healthcare and BSE IT indices have climbed 11%,22% and 59% in the last one year. The benchmark BSE Sensex has risen about 9% in the past one year
Industry observers said some of these schemes had suffered due to their exposure in banks,which have been hammered on the bourses in the past year. Several of these funds have a high proportion of their assets invested in the financials sector. For instance,financials formed the top holding for schemes such as HDFC Top 200 (26.2%),SBI Contra (22.4%) and UTI Dividend Yield (21.4%). The BSE Bankex has slid 9% in the past one year.
Fund managers who were betting on a recovery in the economy and a cut in interest rates have done particularly badly.
By and large,the thinking among fund managers was that interest rates would come down during the year. Instead,interest rates went up, said Mehta. In sum,the repo rate rose by 50 bps during CY13.