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Volatile equities and a lack of a directional trend in the market have taken a toll on the performance of large equity funds in the last one year. An analysis of the top 25 equity funds that manage the most by way of AUMs shows that 16 (or 64%) of the these funds have underperformed their benchmarks, data collated from Value Research show.
The underperformers include names such as HDFC Top 200, HDFC Equity, Reliance Equity Opportunities, Franklin India Bluechip, Reliance Growth, DSPBR Top 100 Equity Reg, SBI Contra, UTI Equity and DSPBR Equity.
Reliance Tax Saver emerged the top underperformer for the one-year period, lagging its benchmark by 10%. Others that lagged their benchmarks include Reliance Growth (8%), Reliance Regular Savings Equity (7.7%) and UTI Dividend Yield (6.8%). HDFC Top 200 and HDFC Equity, which manage more than R20,000 crore between them, have underperformed their benchmark indices by 3% and 3.8%, respectively. Experts believe the market has become too volatile and outperforming during these times has become difficult. “It’s an extremely polarised market right now as only select stocks and sectors are doing well,” said Vicky Mehta, senior research analyst, Morningstar India.
“If you are not invested in these sectors, the market will punish you. But that doesn’t necessarily mean that the fund manager is doing badly or the fund is not doing its job.” Sectors such as FMCG, pharma and IT stocks have been holding up the market in the past few months, said experts. BSE FMCG, BSE Healthcare and BSE IT indices have climbed 14.2%, 17.4% and 35% in the last one year. The benchmark BSE Sensex has risen more than 2% in the past one year.
Experts added that some of these schemes had suffered due to their exposure in banks, which have been hammered on the bourses in the past year. Several of these funds have a high proportion of their assets invested in the financials sector. For instance, financials formed the top holding for schemes such as HDFC Equity (22.02%), HDFC Top 200 (25.5%), SBI Contra (27.47%) and UTI Dividend Yield (20.84%). The BSE Bankex has slid 13.5% in the past one year.