Net asset value, or NAV, of most equity funds witnessed a drop in September, as Dalal Street witnessed brisk selling in stocks amid soaring crude oil prices, falling rupee and rising bond yields.
Headline equity indices BSE Sensex and NSE Nifty plunged over 6 per cent during the month, registering their worst monthly fall in 31 months.
In the mutual fund space, banking as a category slipped the most at 13.37 per cent, followed by smallcaps (down 12.19 per cent), midcaps (down 11.37 per cent) and infrastructure-oriented funds (down 11 per cent). Equity large & midcap, multicap, ELSS, value-oriented, largecap and pharma funds dipped between 4 per cent and 10 per cent.
Fund-wise, Aditya Birla Sun Life Banking & Financial Services Fund slipped most during the month at 17 per cent, being the worst performer among banking funds. LIC MF Banking & Financial Services Fund and Reliance Banking Fund declined over 15 per cent in September.
There are expectations that the slide in banking stocks may continue for some more time, as they are susceptible to tightening liquidity, although the tide should turn for corporate banks on resolution of more stressed assets and a halt to the upward movement in bond yields.
“It’s difficult to predict the short-term outlook for banking stocks, but the slide could continue in the coming days until the dust settles,” said Gautam Duggad, head of research, Motilal Oswal Securities.
“However, it’s a good time to buy top corporate banks”.
The BSE Bankex fell 12 per cent in September, while the BSE Realty and Auto indices tumbled 20 per cent and 13 per cent, respectively.
The BSE Smallcap and Midcap indices plunged doubled digits. Among the smallcap equity funds, HSBC Small Cap Equity Fund, Sundaram Small Cap Fund, ICICI Prudential Smallcap Fund and DSP Small Cap Fund slipped over 13 per cent.
Among the midcap-oriented funds, Motilal Oswal Midcap 100 Exchange Traded Fund (down 13.67 per cent), DHFL Pramerica Midcap Opportunities Fund (down 12.92 per cent), Tata Midcap Growth Fund (down 12.44 per cent) and Baroda Pioneer Fund (down 12.40 per cent) were the top losers.
In the infrastructure space, HSBC Infra Equity Fund dipped 15.41 per cent in September, while HDFC Infra Fund and BOI AXA Manufacturing & Infra declined 14.85 per cent and 14.10 per cent, respectively.
For those looking to start an SIP with at least five years’ horizon, a multicap fund or a category called largecap and midcap where you have ability to put money across market capitalisation should work out best, says Navneet Munot, CIO, SBI Mutual Funds.
“There are a lot of sectors in India where the largest company is a small cap or a midcap. A multicap fund is very good,” he told ETNow.
From the large & midcap category, NAVs of BOI AXA Large & Micap Equity Fund, Canara Robeco Emerging Equities Fund, LIC MF Large & Midcap Fund and ICICI Prudential Midcap Select ETF dipped between 10 per cent and 16 per cent last month.
Among pharma-related funds, UTI Heathcare Fund, Tata India Pharma and SBI Healthcare Opportunities Fund lost 6.44 per cent, 6.28 per cent and 4.45 per cent, respectively, in September.
With a fall of up to 11 per cent, Aditya Birla Sun Life Pure Value Fund, IDFC Sterling Value Fund and JM Value Fund were the top losers in the value-oriented fund category.
International funds managed to deliver positive returns to investors in last one month. HSBC Brazil Fund, DSP World Mining Fund and Reliance Japan Equity Fund advanced 8.83 per cent, 7.86 per cent and 4.93 per cent, respectively, during the month.
The recent selloff in the stock market has raised fears of a rush for redemption in mutual funds.
Before taking any decision, here is a word of advice from Vidya Bala, Head of Research of Fundsindia.
“This is the time when one should continue with their SIPs, given the volatility in stocks. This is the period for cost averaging. Investors should first avoid stopping SIPs. This is a good time for systematic investors. One should not make any decision on the basis of fund performance if you have an SIP. First, tide over the volatility with SIPs and then make an assessment of fund comparison. Largecap, midcap as well as multicap funds are ideally placed right now for cost averaging,” Bala said in an earlier interaction with ETMarkets.com.
