Mutual funds lose heavily in crash

On an average, diversified equity funds lost a shade more than the market at 14.67 per cent as compared to the Sensex loss of 14.2 per cent in the sell-off.

Data from Value Research Online suggests that only 52 funds managed to keep their net asset values (NAVs) from falling faster than the Sensex. Much of the average impact on diversified equity mutual funds was cushioned largely because of the large amount of cash component in some newly launched funds.

Value Research’s Dhirendra Kumar reckons that 21 funds have lost more than 20 per cent since the market peak on May 10, 2006.

No mutual fund, however, managed to keep their head above water as losses ranged from 4.53-20.53 per cent. Some of the worst hit funds have been Taurus

Discovery, Canemerging Equities and LIC Mutual Fund Equity Fund.

Some of the funds that were the least hit were the recently launched Quantum Long Term Equity Fund, Sundaram Select Midcap and DBS Chola Global Advantage Fund. However, fund analysts contend that 3-4 days of performance is too short a period to assess returns. ‘‘Since mutual funds should strive to protect capital, the comparison is justified,’’ said an analyst.

Says Dhirendra Kumar, CEO, Value Research Online: ‘‘Usually one should not look at a 3-4 days performance, but mutual funds have to serve a basic need of protecting investors capital. That’s what investors are looking for’’.

Over 20 funds have also slipped below the psychological Rs 10 NAV mark.‘‘It may sound silly but there are many investors who have invested looking at a face value of Rs 10, to them a lower NAV will be a huge psychological blow,’’ he said.

Some of the funds have also fallen below their initial launch NAV of Rs 10. ‘‘Another type of equity-oriented fund, the tax saving or ELSS funds, under-performed equity diversified funds. This’s because most of the equity diversified funds had a large component of cash still left to be invested whereas tax-saving funds were fully invested in the market,’’ Kumar said.

Tax saving funds lost an average 15.13 per cent as against the Sensex loss of 14.2 per cent while their losses ranged from 12.1-17.5 per cent

since May 17.

Over the last one-month too, returns have been negative with diversified equity and tax saving funds losing 13.24 and 13.18 per cent on average as against 12.87 per cent of the Sensex.

But analysts reckon that MFs should be able to recover from the blow. ‘‘Funds can recover and will recover,’’ Kumar said.