The Reserve Bank of India’s (RBI) continued measures to tighten the monetary policy to arrest inflationary pressures has led the interest rates to go up more than 200 basis points (bps) in the current calendar year. This has hit the equity-linked banking and auto funds and stocks from the sector very much in the last six months ending on July 16. However, the return on the banking funds has comparatively dipped lower than the Bombay Stock Exchange (BSE)?s Bankex.
According to ValueResearch, the banking funds have given the highest negative returns at 47% as against 55% dip in the Bankex. A fund manager from a domestic fund house said that the banking funds have performed better than the sectoral index purely relying on the fund managers’ investment management skill. After banking sector funds, it is the equity-linked auto sector funds which have given the second highest negative return. Both the auto funds and stocks from the sectors have performed alike. The return on the auto funds has eroded by 36% whereas the BSE Auto index has also dipped by 36% during the period.
Commenting on the rising interest rate regime, Dun and Bradstreet, a global research agency, said that the oil prices in the global market was putting inflationary pressures in the domestic market. RBI would continue with its monetary tightening policy in order to curb demand-side pressures that is likely to impact the interest rate sensitive sectors including Banking and Automobile.
It may be mentioned here that RBI?s monetary mechanism has resulted a rate hike of more than 2% in the current calendar year. The market meltdown has been felt across the sectors and the equity linked funds. Both the benchmark indices have dipped 36% year till date. The return on the technology funds and the FMCG fund was negative at 27% and 24% respectively.