Equity funds back in reckoning after posting 65% annualised return

Jai Kumar N R

New Delhi, Aug 31: Equity funds seem to be back in the reckoning as they have given an annualised return of 65 per cent during the past one month compared to negative returns during the past three months. These funds hit the return charts after a prolonged one and half years.

The funds shattered the investor confidence in equity which have hardly been attracting fresh inflows for quite sometime. The whopping annualised return of up to 65 per cent in the past one month ended August 30 may cheer up many souls. Of a total of 54 open-ended diversified equity funds, as many as 35 have given a monthly return of up to 12.29 per cent. The annualised return works out up to 147.48 per cent.

Sector-specific funds like pharma and infotech and the tax planning equity schemes have outsmarted even debt schemes which have been giving returns over 20 per cent since beginning of this year. Pharma funds topped the return chart with an annualised figure of 65.4 per cent during the past one month against a negative return of 16.36 per cent during the past three months. Technology follows closely with a return of almost 43 per cent compared to an annualised figure of a negative 78 per cent during the past three months. Tax planning equity funds have given almost 26 per cent compared to a negative 38 per cent. Diversified equity schemes have given a return of 12.72 per cent as against a negative 46 per cent during the past three months.

This shows that probably, equity is down but not out. Says Value Research CEO Dhirendra Kumar, “Equity is not dead. Its for long-term players who have the courage to stay invested even in a bear phase. Many investors, however, pressed panic selling in equity and moved towards debt. It took so much pounding that valuations have turned very attractive.”

The performance of diversified equity schemes also shows a renewed focus on diversification as most of them were overweight on IT.
“After the ICE meltdown, fund managers have been going all out for diversification. This seems to have paid off. There has been a shift towards pharma companies and some select banks like Oriental Bank of Commerce and Corporation Bank,” Mr Kumar adds. There has been a buoyancy in pharma counters and the one-month performance of these funds reflects this. Companies like Ranbaxy, Glaxo, Dr Reddy’s and Cipla have been hitting the headlines.