Gilt funds emerged best performers among 22 mutual fund categories, according to Crisil Mutual Fund Rankings released for the quarter ended June 2012. However, despite giving superior returns, the growth in assets under management (AUM) of these funds was negative.
Gilt funds returned 3.1% over the quarter, outperforming both equity and other debt-oriented categories. This was mainly on account of the softening of yields on the back of the Reserve Bank of India (RBI) reducing the repo rate by 50 basis points (bps) to 8% in its annual monetary policy for 2012-13 in April 2012. Bond yields and prices move in opposite directions when yields fall, prices/NAVs (of bond funds) rise and vice-versa. On the other hand, equity funds returned 1.39% during the quarter vis--vis 1.93% by the S&P CNX Nifty and 1.12% by the S&P CNX 500 Equity Index.
The higher returns from gilt funds failed to translate into increase in AUM for the category. For the quarter ended June 2012, the average AUM of gilt funds analysed fell by 13% to R2,574 crore vis--vis R2,968 crore in the previous quarter. This was primarily because investors were uncertain about the pace at which the central bank would reduce interest rates. After the repo rate reduction in April, the RBI retained key policy rates at its mid-quarter policy review in June, giving priority to inflation over growth. Thus, even though gilt funds outperformed other categories, investor interest in this category was muted. Majority of investor interest was towards the income funds, especially dynamically managed bond funds, which witnessed a growth of 33% in AUM for the June quarter to R10,446 crore from R7,812 crore. This category returned 2.66% during the period under review.
At fund house level, HDFC MF continued to lead the tally of top-ranked funds for the quarter ended June 2012, with 12 funds under CRISIL Fund Rank 1 (same as in the previous quarter). This was followed by UTI MF with nine top-ranked funds (five in the previous quarter), ICICI Prudential MF with seven funds (three in previous quarter) and SBI MF with six funds (seven in previous quarter).