Thanks to the Narendra Modi-inspired rally in the capital market, investors stuck in mutual fund equity schemes since 2008, when stock markets plunged in the wake of the global financial meltdown, now have reason to smile.

With the exception of seven funds that have an insignificant asset base, all other equity schemes — 229 of them — have posted positive returns after six-and-a-half years. The market had crashed on January 8, 2008.

“With this current hope rally, most schemes have turned around. The average returns posted by equity schemes are better than debt funds, when one takes tax into account,” said Gopal Agarwal, CIO of Mirae Asset Global Investment.

UTI Transportation & Logistics, Reliance Pharma Fund and Birla Sun Life Pure Value Fund have delivered a CAGR (compound annual growth rate)in excess of 30 per cent since January 8, 2008.

Absolute returns of top schemes have ranged from 200 to 300 per cent (see table).

And all this is despite some companies ruling well below their 2008 peak. For instance, DLF’s shares had soared to ₹1,225 on January 7, 2008. Today, they are quoting at ₹233. Similarly, Suzlon was at ₹460 and is now ₹34.5.

JM Basic Fund (Growth) and Escorts Infrastructure are among the seven funds that are still languishing at the bottom of the table with negative returns.

AUM crosses ₹10 lakh crore

Thanks to the strong showing by the equity markets and fresh capital inflows, the mutual fund industry’s assets under management crossed the ₹10 lakh crore mark at the end of May.

Though there were fresh inflows, total folios of the mutual fund industry fell by 2.4 lakh or 0.61 per cent to 3.89 crore in May from 3.92 crore in April.

According to analysts, investors who had invested in equity funds and equity-linked savings schemes during the market highs of 2007-08 quit the schemes as the recent surge provided them an exit opportunity. Many had bought into mutual funds during the 2006-08 bull run, said Mirae Asset’s Agarwal.

As most of them were first-time investors, the sudden crash due to global events and the subsequent slowdown in the domestic economy caught them off-guard.

Swati Kulkarni, Executive Vice-President (Equity), UTI Mutual Fund, said investing in mutual funds is all about believing and staying invested through good and bad times.

“Unfortunately, many retail investors compare mutual fund returns with fixed deposits, without considering that returns from mutual funds are tax free and that the upside they can provide over a period of time is unlimited,” she said.

Asked whether investors should invest in mutual funds even after the sharp spike in the market recently, Kulkarni said depending on the Government’s policy announcements, the market can register a CAGR of 15 per cent over next three fiscal years.

“Timing the market (poorly) is one of the big mistakes retail investors commit. If you do not invest now you will not be able to reap the benefits,” she added.

According to Mirae Asset’s Agarwal, investors should have an investment plan and stick to it: “They should allocate funds to all asset classes, based on their risk profile.”

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