BOMBAY, 27 May — This week, we take a look at the performance of the various mutual funds in financial year 2001-02. There have been quite a few surprises, marking clearly that no one year is similar to the other, reiterating the fact that investment strategies have got to be ever dynamic. And based on the assessment of the performance, one can decide on what funds to back in the current fiscal.
With 36 companies peddling 417 funds, the Indian mutual fund industry, billed to be worth $20 billion now, offers a vast array of ways to invest in professionally managed money, debt and equity funds. The industry has become one of the fastest growing sectors in the country’s capital and financial markets, with an average compound growth rate of 20 percent over the past five years.
As of March 31, the Indian mutual fund industry had $20.4 billion under management, up 11 percent from a year earlier. Half was still managed by India’s largest mutual fund, Unit Trust of India (UTI), down from three-quarters a year earlier. About 70 percent of the money is invested in debt funds and about 45 percent in equity funds and the chunk of these funds come from just three cities — Bombay, Delhi and Kolkata.
The financial year ended March 28 was very volatile for the stock as well as the debt markets. Investors have shifted to safer havens like bank deposits or low risk debt schemes of mutual funds. Mobilizations of mutual funds jumped up by 77 percent from Rs.930 billion in FY 2000-01 to Rs.1,645.23 billion in FY 2001-02. About 89 percent of the funds were mopped up by private sector players. Debt schemes accounted for Rs.1,629.44 billion, as against Rs.670.45 billion in FY 2000-01, a jump of 143.09 percent and a share of 99 percent in the total mobilizations.
Among the 200 open ended equity schemes analyzed, 92 schemes outperformed the benchmarks of Sensex and the NSE Nifty and 164 schemes posted positive returns. Among the 236 open ended debt schemes, 131 outperformed the benchmarks of 1-year SBI deposit rate of 8.50 percent as in March 2001 and the respective averages. Only 3 schemes posted negative returns.
Reliance Mutual Fund was the best performing fund house in FY 2001-02. Out of its 14 schemes, 11 beat the benchmarks. Thus 78.57 percent of its schemes outperformed. Templeton Franklin Mutual Fund achieved the second best position with 58.33 percent outperformers. HDFC Mutual Fund was the second runner-up with 47.62 percent outperformers. And other funds which also ranked among the better performers were DSP Merill Lynch, Sundaram, Dundee, Prudential ICICI and ING Savings Trust. Templeton India G-Sec Fund remained the topper among open-end long-term gilt funds. It posted the highest returns in the category. In the debt fund category, new entrant Kotak Mahindra K Bond Wholesale made a spectacular start zooming into the first place, sharing it with JM Income Fund.
Driven largely by growth in corpus of debt schemes, the total asset base for 10 biggest private sector fund houses rose by 66 percent to Rs.340.08 billion on March 31 against Rs.204.40 billion a year ago. The top 10 asset management companies are Alliance Capital, Birla Sun Life, DSP Merrill Lynch, HDFC Mutual Fund, Kotak Mahindra, Pioneer ITI, Prudential-ICICI, Stanchart, Templeton and Zurich.
Another major change noticed in the mutual fund industry was the change in the preference. Software stocks, which held the fund manager’s, fancy in the past, have given way to the old economy stocks though, ironically, Infosys Technologies continues to remain the most favored stock of almost all the fund houses. Public sector stocks are the new buzzword. HPCL, which was at the fifteenth rank as at December ‘01, is now at third position, second being held ITC. The pharmaceutical sector, which was the second most favored sector last year, seems to have lost the edge in FY01-02. Reddy’s, Ranbaxy and Cipla have all witnessed fall in the ranks.
So based on all this, where does one invest in this fiscal? Analysts say that it is best to go for a combination of debt and equity schemes. Gilt funds are the best for a time horizon of two years and beyond. For a time horizon of less than one year, debt funds are ideal.
The trend which has emerged is that investors are shifting from debt funds as the perception is that with falling interest rates, the gains in the previous fiscal were not likely to be repeated. Based on this fact, it is best for investors to look at equity oriented schemes.
Under the present circumstances, equities may be shrouded in uncertainty but it is prudent to see into the future. Undoubtedly, equities have bottomed out and this is probably the right time to take a forward position in equities.
