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Financial Express

Market fall: Most equity funds yield negative returns in past one year

On the other hand, in the last one year, the worst performance of the schemes such as Kotak PSU Bank ETF, Nippon India ETF PSU Bank BeES and CPSE ETF, among others.

Most equity schemes of mutual funds have given negative returns in the last one year due to sharp correction in the Indian equity markets. Of a total of 333 equity schemes, nearly 93% of the schemes have given negative returns in the past one year. However, equity funds, which had invested in stocks such as Kotak Mahindra Bank, Bajaj Finance and ICICI Bank to name a few, have managed to give positive returns in the past one year.

Funds such as Axis Small Cap Fund, IIFL Focused Equity Fund, Axis Bluechip Fund have been top performers in the last one year. Mayur Patel, fund manager of IIFL Focused Equity Fund, says: “We build a portfolio of 25-30 stocks across market capitalization. Stocks in the portfolio are selected based on SCDV (secular, cyclical, defensive and value trap) framework. Around 50% of the portfolio is in high quality secular growth companies, which are long-term compounding stories. While the remaining portfolio is divided into quality cyclicals and defensives while avoiding value traps.” He also added that focus on alpha-generation is based on high conviction ideas across these segments, which work across cycles in the market.

Even international funds such as Motilal Oswal NASDAQ 100 Exchange Traded Fund (ETF), Edelweiss Greater China Equity Off-shore Fund and Franklin India Feeder Franklin US Opportunities Fund have managed to give positive returns. Market participants say that positive performance of international funds was due to the rupee depreciation and positive performance of US equity markets in the past one year. In the last one-year, Indian rupee has depreciated by 7% against US dollar, while NASDAQ 100 is down by just 4.9%. However, Dow Jones index have given negative returns of 18% in last one year.

On the other hand, in the last one year, the worst performance of the schemes such as Kotak PSU Bank ETF, Nippon India ETF PSU Bank BeES and CPSE ETF, among others. Apart from that, infrastructure sector and small-cap funds were also laggards in the last year. In terms of sectoral returns, infrastructure sector saw its category average at -16.25%, with all the 22 schemes giving negative returns in the category. Of a universe of 36 mid-cap and small-cap equity schemes, only three schemes such as Motilal Oswal Midcap 30 Fund, Axis Midcap Fund and Axis Smallcap fund have given positive returns. The returns are as on March 13, 2020.

In past one year, the Sensex is down by 17.45%, while S&P BSE Midcap Index and S&P Smallcap Index have given negative returns of 21.64% and 25.22%, respectively, in the past one year. A Balasubramanian, MD & CEO of Aditya Birla Sun Life AMC, says: “I would say that markets are pricing in degrowth in both economy and corporate profitability, which is the reason we are witnessing such sharp correction. The stocks which were high valued are beginning to correct.”

In the last few days, equity markets have seen sharp correction due to the spread of novel Coronavirus. However, market participants believe that bottom has been made in Indian equities. “With such sharp fall in the markets, some of equity funds have given negative returns. But we hope bottom has been made and over the next few months markets will recover,” added Balasubramanian.

However, there are market participants who believe that Indian equity markets will be taking cues from the US equity markets. Anoop Bhaskar, head-equity at IDFC Asset Management Company, says: “This is stage of the unknown as we have see how the US stabilizes as the market. I would have been worried if gold was rising because that would mean people have lost some faith in paper currency. But even gold prices have fallen and, therefore, I think this is a scare that there is general recession in world rather than worry on just financial assets.”