Equity funds NAVs witness up to 17% erosion in a week

Jai Kumar NR

New Delhi, Sept 17: The mayhem in stock markets has cast its shadow on equity funds as their net asset values (NAV) have seen a massive erosion of up to 17 per cent in one week. Thanks to the terrorist attack in the US and fear of a war, the Sensex has lost over 500 points since September 11. In tandem, 105 equity funds have seen an average fall of 9.33 per cent between September 7 and September 14.

The sector-specific information technology (IT) funds are the worst hit among all category of equity schemes as there has been massive off-loading in software stocks led by foreign funds. Technology funds like Alliance New Millennium (NAV fell by 17.29 per cent), Prudential ICICI Technology (15.25 per cent) and Pioneer ITI Internet Opportunities Fund (14.77 per cent) top the list of losers. Petro fund, UTI Petro, followed closely with a fall in NAV of 14.21 per cent. The fall in the NAV is due to a plunge in petro stocks like Reliance Petroleum, HPCL, BPCL, Mangalore Refineries, etc, on fears of a spurt in global crude oil price.

While eight IT funds figured among the top 13 equity fund losers, IL&FS eCom (9.25 per cent), Chola Freedom Technology (6.72 per cent), Birla IT (6.71 per cent) and Magnum IT (5.11 per cent) have seen comparatively less erosion in NAVs during the period.

Diversified equity funds like Alliance Equity (12.88 per cent), ING Growth Portfolio (12.86 per cent), Magnum Multiplier Plus (12.44 per cent) and Pioneer ITI Bluechip (12.23 per cent) figured among the top 15 losers during the one week period.

The sharp losses in NAV of these funds have also been due to their high exposure to the IT stocks, which have been hammered to rock-bottom levels, according to a fund analyst.

Equity funds’ NAVs are further expected to see sharp losses as the markets find new bottoms. Said a source at a leading mutual fund: “If foreign funds turn net sellers in the US markets after their opening, the outflows from India are likely to increase further.
Hence, the equity funds are expected to take more beating in the days to come.”

The source also admitted that there may be outflows from the equity funds as the uncertainty in the markets continues. “Retail investors are already started shifting from equity to liquid schemes and hence are prepared to take losses,” the source said.

Tax saving equity schemes have also been hit badly and some of them have high exposure to technology stocks. Prudential ICICI Tax Plan (11.69 per cent), Alliance Capital Tax Relief ’96 (11.49 per cent), Magnum Taxgain (11.41 per cent), Libra Taxshield ’96 (11.18 per cent), Franklin India Index Tax Fund (11.07 per cent), Pioneer ITI Taxshield (10.81 per cent), Canequity-Tax Saver (10.64 per cent), Tata Tax Saving Fund (10.28 per cent), IDBI Principal Tax Savings Fund (10.26 per cent), Zurich India Taxsaver (10.11 per cent) and UTI Equity Tax Savings Plan ’00 (9.97 per cent) are major losers.