The ongoing uncertainty in the capital market seems to have taken a heavy toll on the mutual fund industry which is considered a safe investment route for small investors.
Most diversified equity funds have underperformed the benchmark Sensex in the first half of this year. Returns from average diversified equity funds have dipped eight per cent in six months ended June 30, while the Sensex was down 0.16 per cent in the same period.
The underperformance was mainly due to the performance of the funds that have catered to small-cap and mid-cap segments. Mid- and small-cap funds gave out a negative return of about 12 per cent, but managed to better the benchmark indices — BSE Small Cap Index and BSE Mid Cap Index that have crashed about 23 per cent and 16 per cent respectively.
Gold funds were the worst performer, crashing 15.4 per cent in the first half of 2013.
Better performers
Axis Equity Fund has delivered a return of 4.22 per cent in the first of this year, while Axis Focused 25 Fund managed to stay among the top 10 performers by registering a return of 0.7 per cent.
The second best is Deutsche Asset Management, which also had two of its schemes, DWS Alpha Equity Fund and DWS Investment Opportunity Fund, among the top 10 performers with a return of 1.98 per cent and 0.55 per cent, respectively.
Religare Invesco Mutual Fund had three funds — Religare Invesco Equity Fund, Religare Invesco Business Leaders Fund and Religare Invesco Growth Fund — delivering better returns.
Karan Datta, Head — National Sales, Axis Mutual Fund, said the focus is to give the maximum return with minimal risk and it has worked wonders for all the schemes floated by the fund house with 35-40 per cent of incremental investments coming from tier-II and III cities.
“Our survey among investors has revealed that they hate volatility and prefer predictable returns. In fact, we have seen positive inflows even when the industry was battling redemption pressure,” he added.
Worst performers were HSBC Progressive Theme Fund, which produced a negative a return of 26.68 per cent, followed by HSBC Mid-Cap Equity (-25.75 per cent) and Sundaram Capex Opportunities Fund (-23.62 per cent).
Big ones suffer
Large mutual fund houses were under constant redemption pressure whenever the markets bounced back after a sharp fall. The cancellation of investment in mutual funds through systematic investment plans (SIPs) has also increased due to the poor performance of most equity schemes.
Fund houses had to set aside a portion of their asset to meet the ever growing redemption. This might have dented their returns, said Mukul Wasnik, an independent financial advisor.