>Performance of Mutual Funds in CY 2011 & Toppers and Laggards during the year 2011

Overview: Indian stock markets showed disappointed performance during the calendar year 2011 as major factors such as high inflation, growth slowdown, rising interest rates, weak rupee, foreign fund outflows, high commodity prices, emergence of various industry-related scams, euro zone debt crisis, etc dampened the sentiments. The key indices, BSE Sensex ended at 15,544 down 4,965 points or 24.71% while the Nifty ended at 4,646 down 1,488 points or 24.68% compared to the previous year. Consequently, the performance of Indian equity mutual funds was also poor where all the equity categories barring FMCG posted negative returns over the period. However, part of actively managed schemes managed to contain the losses well as their NAVs depreciated less compared to the benchmarks.


Debt: On the debt front, the Repo rate, an interest rate indicator of Indian economy, was increased by 225 bps by the RBI over the year to tame the persistent inflation, to 8.50% at the end of the year 2011. Such elevated level in the interest rates resulted in spike in the yields of short debt instruments like Call, CD and CP, benefiting debt mutual fund schemes which invest predominantly in such instruments. Further, the RBI’s reversal in monetary policy stance on the back of moderation in inflation later towards the end of the year softened the yields of government papers. With softening yields, gilt funds have emerged as the biggest beneficiaries in the last two months of the year. The 10 year G Sec benchmark yields moved to a high of 9%+ level in September and closed up the year by 65 bps at 8.56% on Dec 30, 2011 Vs. its close of 7.91% at the end of the previous year.


Gold: Gold had been one of the top performing assets during last year. Continuing its record-breaking spree, gold galloped to all time highs in 2011 (from USD 1400 levels in 2010 to USD 1900 levels in September 2011) on the back of strong demand in times of economic turmoil and rising inflation. Gold rose 11.65% in USD & 30.74% in INR during the year while brent Crude rose approx 15% and US Dollar Index rose by 1.85%. Nervous investors preferred to park their funds in gold as a safe investment instead of risky assets like equities. Internationally gold prices saw correction later from its all time highs. However, falling INR has acted as a cushion for gold prices in India.


Mutual Fund Industry: As far as Indian Mutual Fund industry is concerned, the Average Assets Under Management of overall mutual funds rose by 0.54% Y-o-Y as of 31st December 2011 to Rs. 6,81,708 crore (AMFI Data). The total net inflows into the industry for the calendar year 2011 period stood at Rs. 36,918 crore while the total net outflow was at Rs 32,164 crore in the corresponding previous year. The industry collected Rs. 1,23,341 crore via new fund offers during the period.


Toppers and Laggards during the year 2011:


Category: Within categories, Gold ETF outperformed others during the year 2011 and posted 30% return. The yellow metal rose 30.74% in INR during the year as investors preferred to invest in gold as a safe investment instead of risky assets like equities. Equity sector - FMCG was the second top performer as it registered 13% of compounded returns during the year 2011. The FMCG index gained 9.53 per cent in 2011. Most of the FMCG companies were able to maintain their margins despite higher raw material prices and a sales slowdown. Equity – Infrastructure was the worst performing category in 2011 where it registered a compound annualized return on -35%. The year 2011 saw Construction & Infrastructure stocks underperforming the broader indices on account of tightening policy rates, muted order inflows across segments (except roads) & rising commodity prices affecting execution and margins. The CNX realty fell by 52% during the last year.


Scheme: Apart from Gold ETFs, ICICI Pru FMCG Fund, Canara Robeco InDiGo Fund and Sahara Short Term Bond Fund were the top performing schemes in the mutual fund industry where they delivered commendable returns of 16%, 15% and 14% of CAGR returns respectively. Active call strategy coupled with trading opportunities in the short term debt instruments spectrum helped income and short term schemes to outperform other schemes. Escorts Infrastructure Fund, HSBC Small Cap Fund and Reliance Infrastructure Fund were the bottom performers among mutual fund schemes as they posted negative returns of 47%, 46% and 45% respectively. The poor performance by the infrastructure sector was primarily driven by a range of sector-specific issues, such as land acquisition, environmental clearances, high interest rate regime and macro-economic factors. On asset weighted average returns basis, Equity Diversified large cap category outperformed the equity diversified midcap category but underperformed the equity diversified multi-cap category on a Year on Year basis. The largecap category posted an average CAGR returns of -23% while the midcap and multi-cap registered -24% and -20% of compounded returns respectively. In 2011, the indices - BSE Midcap index and BSE small cap fell 34% and 43% respectively.


To read the full report: Performance of Mutual Funds
RISH TRADER