Amidst brisk selling on the bourses due to the ongoing depreciation in the rupee coupled with the sky-rocketing crude prices and the IL&FS fiasco, equity mutual funds across categories have shown negative returns in one to six months’ time-frame. In the month of September 2018, equity mutual funds have on an average returned -9.73 per cent. Small cap mutual fund category has been the worst hit with returns standing at -12.56 per cent, followed by banking sector (down 12.43 per cent), midcaps (down 11.39 per cent) and infrastructure-oriented funds (down 11 per cent). Equity large & midcap, multicap, pharma funds, value-oriented, ELSS have all dipped between 4 per cent and 10 per cent. A category-wise performance of various mutual fund schemes is presented below:
Large and midcap category: From the large & midcap category, NAVs of BOI AXA Large & Micap Equity Fund, Canara Robeco Emerging Equities Fund, LIC MF Large & Midcap Fund and Aditya Birla Sun life Equity Advantage fund dipped between 10 per cent and 15 per cent.
Small and Midcap category: The BSE Smallcap and Midcap indices plunged doubled digits in the month of September. Among the small cap equity funds, HSBC Small Cap Equity Fund, Sundaram Small Cap Fund, ICICI Prudential Smallcap Fund and DSP Small Cap Fund slipped over 13 per cent.
Banking Sector: Aditya Birla Sun Life Banking & Financial Services Fund fell 17.26 per cent, LIC MF Banking & Financial Services Fund – Regular Plan declined 15.65 per cent, and Reliance ETF PSU Bank BeES declined 15.63 per cent.
Infrastructure category: In the infrastructure space, HSBC Infra Equity Fund dipped 15.75 per cent in September, while HDFC Infra Fund and BOI AXA Manufacturing & Infra declined 14.47 per cent and 14.55 per cent, respectively, and were the top wealth destroyer.
Multicap Category: In the multicap space, IIFL Focused Equity Fund (down 12.35 per cent), Invesco India Multicap Fund (down 12.42 per cent) and Tata Retirement Savings Fund (down 12.34 per cent) were the top loser.
Pharma Sector: Among pharma-related funds, UTI Heathcare Fund, Tata India Pharma and SBI Healthcare Opportunities Fund lost 6.19 per cent, 6.06 per cent and 3.92 per cent, respectively, in September.
International Category: International funds managed to deliver positive returns to investors in the last one month. DSP World Mining Fund, HSBC Brazil Fund, and Reliance Japan Equity Fund advanced 6.48 per cent, 7.86 per cent and 5.36 per cent, respectively.
A category-wise break up of the performance of mutual funds focused on the equity segment is presented below. The list also includes the performance of hybrid funds, which have both equity and debt as the part of their AUM’s.
In spite of all this chaos, and market volatility inflows into the mutual funds continued to be robust led by healthy participation by retail investors through systematic investment plans (SIPs). Mutual funds’ asset base rose to over Rs 24 trillion in the July-September quarter, a 14% surge from the year-ago period, and showed a robust growth of just 2.5% on quarterly basis from the previous quarter of April-Jun 2018, driven by participation from retail investors and a spirited investor awareness campaign by the industry.
There are a few lessons for an average investor in this type of market environment. If you invest in the equity markets through mutual funds, this is not the time to withdraw your money from the markets. If your investments were through the lump-sump mode and if you have some extra liquidity perhaps this is the time to add more units in a staggered way. The prevailing market condition is a perfect case to showcase the importance of Systematic Investment Plan, and how they are effective tools to smoothen out volatility in one’s portfolio. Since SIPs make regular investments, an investor is buying at each dip of the market. Hence the average cost of acquisition of one’s investment is lower.
Volatile markets can put an enormous amount of stress on individuals who are not used to these market conditions. However, they should consider volatility as an opportunity. Investors should also look out for mutual funds which are well managed, but have fallen sharply due to adverse market conditions. These MFs present an excellent buying opportunity from a long-term perspective.
(By Rahul Agarwal, Director Wealth Discovery/EZ Wealth)
(Disclaimer: These are the views of the author. Please consult your financial advisor before investing in any mutual fund)