Actively managed diversified stock funds in India, which posted their best annual returns in four years in 2007, lost all their gains of last year in the first half of 2008, data from fund tracker Lipper showed.These funds’ net values plunged 38.8 percent on an average as weak global markets and concern on domestic economy under pressure of inflation triggered a fall in local stocks, hurting large bets in financial and capital goods sectors even more.
Nine out of ten such funds fell more than India’s benchmark stock index, which posted its biggest monthly loss in 16 years in June, extending the fall to just over a third in the first half.
Equity funds had risen an average 55.97 percent in 2007 to record their best annual returns in four years.
"This time I think the first six months have certainly caught everyone unawares," Sanjay Santhanam, director of Canara Robeco Asset Management, a joint venture between Canara Bank and Dutch fund firm Robeco.
"They are probably overweight on a few sectors and companies. So that is where they have taken a hit," Aditya Agarwal, joint managing director at fund tracker ICRA Online, said.
Diversified funds invested more than a fourth of their assets in financial services and capital goods sectors consistently in 2008 and suffered as the BSE Bankex and BSE Capital Goods indices tumbled more than 48 percent.
Larger bets on relatively illiquid medium and small-sized firms, commanding an allocation of more than 40 percent of the assets, deepened the looses with the BSE Mid Cap and BSE Small Cap indices dipping more than 44 percent each.
Financial sector funds lost the most, sliding 45 percent, as stocks were hit on expected monetary tightening by the central bank on spiralling inflation, which rose to 11.42 percent in the 12 months to June 14, its highest in more than 13 years.
Gold exchange traded funds were the top performing category,
rising nearly 20 percent, as the yellow metal prices in the local market showed sharper gains compared to foreign markets owing to a fall in the rupee against the dollar.
On June 30, spot gold rate quoted by a bank was at 13,120 rupees per 10 grams, up 21 percent from 10,854 rupees at the beginning of the year.
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