The ongoing US sub-prime mortgage crisis and the waiver of the farm loan in the Union budget have hit both banking stocks and funds the most in the last one month ending on March 7, 2008. However, the return on the banking funds is comparatively hit lesser than the banking stocks because of the better deployment of the funds by the fund houses.
According to the Value Research, a research agency on mutual fund industry, the return over the banking funds was negative to the tune of 15.26% in the last one month. Compared to this, the Bombay Stock Exchange (BSE)?s Bankex has dipped by 18.37% or 1,907 points at 8,477 points, during the same period.
According to a senior fund manager from a domestic fund house, the market has been weak since the beginning of the current calendar year due to the unfolding of the sub-prime crisis in the US.
Off late, it has started impacting the Indian banking sector indirectly. This has weakened the market sentiment towards banking stocks. The announcement of farm loan waiver by the government ibudget for FY09, has further weakened the investors? sentiment. However, the banking-linked funds have performed better than the banking stocks in the equity market, he added.
Interestingly, the negative return on the index-based funds was higher than the benchmark index. The return on the index funds was negative 9.4% whereas the Sensex shed 8.85% or 1,551 points at 15,975 points between February 7 to March 7. Similarly, the technology fund saw erosion in its net asset value (NAV) at 6.43% during the said period. Compared to this, the technology funds consisting of IT stocks have also performed badly. The BSE IT shed 1.8% or 66 points at 3,638 points and BSE Teck lost 7.4% or 243 points at 3,052 points.
The return by auto sector funds was much lower than the one given by the auto stocks. The Auto sector funds witnessed erosion of 5.12% in its NAV during the period while BSE Auto index dipped 3.12% or 149 points at 4,634 points. An analyst from a domestic brokerage firm said that the market globally has been week in the last two and half months due to sub-prime factor which has affected both domestic equity market and funds.