India Insight

Equity funds underperform Sensex for first time since 2008

India’s diversified equity mutual funds rose in 2013 but underperformed the broader markets for the first time in five years, as returns were dampened by the losses in the mid- and small-cap shares as well as financial companies.

These funds gained 4.8 percent on average in 2013, according to data from fund tracker Lipper, delivering lesser annual returns than the benchmark BSE Sensex after 2008.  The Sensex touched life highs in 2013 and ended 9 percent higher, boosted by foreign inflows of more than $20 billion.

Shares of smaller companies, however, underperformed, with the BSE mid-cap index falling 5.7 percent and the small-cap index sliding 11.2 percent. Waqar Naqvi, chief executive at Taurus Mutual Fund, said the sharp fall in mid- and small-cap stocks came as a surprise in 2013.

“It was not expected that the market would create a life-time high again this year (2013) … I think it was a directional call which was unexpectedly in the other direction, which led to a situation where you did not load up yourself much more with large caps,” Naqvi said.

Funds were hurt because of significant exposure to smaller shares — data from Morningstar India showed that 35.54 percent of equity funds’ assets on average were allocated to such stocks during Jan-Nov. Data for December was not yet available.

Markets this week: Sensex gains 1 percent, Tata Power surges over 10 percent

By Ankush Arora and Aditya Kalra

The BSE Sensex ended with gains of 1 percent in the week ending Dec. 6, as investor sentiment was boosted after exit polls indicated the Bharatiya Janata Party (BJP), seen by many as being more business-friendly, will win four of the five state elections conducted recently.

State elections are seen as a semi-final before the national polls next year. Elections are the key theme for the first half of 2014 and the recent rally in the stock market implies that a BJP government is no longer viewed as a low-probability scenario, UBS said this week. The investment bank has set a 2014 target for Nifty at 6,900.

Foreign institutional investors (FIIs) inflows for the year have crossed 1 trillion rupees, regulatory and exchange data showed. They have made net purchases of around $18 billion so far this year, Deutsche Bank figures show.

Equity funds outperform in November; smaller shares rise

India’s diversified equity funds bucked the trend in the broader markets to eke out gains in November, as a strong performance by mid- and small-cap shares and sectors such as capital goods supported unit values.

Data from fund tracker Lipper, a Thomson Reuters company, showed that such funds rose only 0.21 percent on average in the month, but outperformed the 30-share BSE Sensex that fell 1.8 percent.

Mahesh Patil of Birla Sun Life Asset Management cited the outperformance of mid- and small-cap stocks as the “main reason” for positive returns generated by diversified equity funds in November.

Equity mutual funds record best monthly performance since Jan 2012

India’s diversified equity funds posted their best monthly performance since Jan 2012 as the benchmark Sensex scaled record highs in October, with bets on sectors such as banking and capital goods boosting mutual fund returns.

Such schemes, which form the largest category of equity funds in India by number and assets, rose 9.2 percent on average, mirroring returns on the 30-share BSE Sensex, data from fund tracker Lipper, a Thomson Reuters company, showed.

The Sensex hit an all-time closing high in October — and went on to touch a life high on Nov. 1 ahead of the Diwali weekend — bolstered by foreign inflows of around $3.5 billion after the U.S. Fed decided to delay stimulus tapering.

Markets this week: Sensex falls 2.6 percent, Jindal Steel slumps 9 percent

After rising for four consecutive weeks, the BSE Sensex fell 2.6 percent in the last five trading sessions, as a surprise repo rate hike by the Reserve Bank of India (RBI) on Sept. 20 dampened investor confidence and battered banking shares.

Rate-sensitive sectors were hurt — the banking index and the realty index lost over 7 percent in the week. YES Bank fell 14.5 percent, SBI lost 6 percent while shares of DLF slumped 13 percent.

While analysts expected the new RBI chief Raghuram Rajan to hold rates last week, expectations for monetary policy have suddenly shifted towards further tightening after the rate hike, a recent Reuters poll showed.

Sensex loses 3.75 percent in action-packed month

The BSE Sensex lost 3.75 percent in August, its worst monthly performance since February, as worries over foreign outflows were exacerbated by the rupee that fell to record lows.

India’s current account deficit and a struggling economy still worry market participants.  Data showed on Aug. 31 that June quarter GDP grew at 4.4 percent, below analysts’ estimates.

The rupee recovered in the last few trading sessions of the month, closing around 65.75 per dollar after falling to a life low below 68. Still, the unit lost 8.1 percent in August, its biggest monthly fall since at least 1995.

Bharti Airtel, NTPC top Sensex losers this week

By Sankalp Phartiyal and Ankush Arora

The BSE Sensex recovered on Thursday and Friday after the index lost around 700 points in the first three trading sessions of the week. However, the index still ended down 0.4 percent as a weak rupee, concerns over foreign flows and uncertainty over the end of the U.S. Fed’s stimulus plan kept investors on the edge.

As a worsening current account deficit and inflation loomed large, the rupee hit fresh record lows below 65 per dollar in the week ending Aug. 23. However, gold prices and bonds rallied.

Fitch Ratings has warned Asia’s third-largest economy of a downgrade if the government fails to soothe tensions in the financial market. JP Morgan and HSBC downgraded Indian shares to ‘neutral’.

Markets this week: BHEL, Sun Pharma top Sensex losers

By Ankush Arora and Sankalp Phartiyal

It was a tough week for Indian shares with the benchmark indexes bearing the brunt as the rupee tumbled to a fresh all-time low of 61.80 versus the dollar on Tuesday. Fears of the U.S. Federal Reserve tapering its stimulus also weighed on street sentiment. The BSE Sensex and the Nifty ended down around 2 percent each during the week.

The day the rupee breached its latest record low, India appointed former IMF chief economist Raghuram Rajan as the next Reserve Bank of India (RBI) governor.

The central bank announced fresh steps after market hours on Thursday to curb volatility in the forex market. The rupee posted its best single-day gain in two weeks in anticipation of support measures by the RBI and the government.

Tracking Sensex: L&T top loser this week

By Aditya Kalra and Sankalp Phartiyal

The Sensex lost 2 percent and the Nifty slipped 2.3 percent in a tough week for stocks as Indian markets remained cautious ahead of the Reserve Bank of India (RBI) policy review on July 30.

The benchmark Sensex, which ended in the red for three of five trading sessions, touched a 2-1/2 year high during the week as consumer goods shares surged.

The rupee continues to be in focus as it hit a five-week high on Friday. The RBI tightened liquidity further on Tuesday to support the rupee and the central bank is likely to hold rates at its policy review next week.

Tracking Sensex: top gainers, losers this week

It was a good week for Indian shares as the BSE Sensex gained 1 percent to close at 20,149.85, after the index touched a near two-month high during trade on Friday. The rupee gained for the second week and ended at 59.35/36 after rising 0.3 percent.

Markets reacted negatively on Tuesday to the Reserve Bank’s moves to tighten liquidity in the system in a bid to support the weak rupee. However, Prime Minister Manmohan Singh said on Friday that these steps may be temporary.

Bank of America-Merrill Lynch expects the Sensex to remain range-bound with limited upside of 5 percent until regional elections in mid-November. The bank recommends investors to be ready to buy on dips at levels of 19,000-19,300.

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