Equity MFs fail to ride market surge In June, Almost All Popular Equity Fund Categories Lagged Sensex, Nifty

 The markets may have ended their losing streak in June, with the sensex and nifty gaining around 9% and displaying their best performance since January this year. But, equity mutual funds (MFs) have had a tepid show in the month with popular categories — including diversified equity funds, large-caps, large and mid-cap and tax planning MFs — lagging indices. 

    While large-cap funds gained around 8.5% in June, diversified funds that invest across sectors and market capitalization advanced by about 7.1%. Nearly six out of 10 large-cap funds posted gains lower than the sensex and nifty in June. Incidentally, index-based funds that mirror the portfolio of their respective indices have gained at a quicker pace than diversified, large-cap and mid-cap funds in June. 
    "The market movement (gains) was concentrated on a few stocks," said Sunil Singhania, head (equities), Reliance Capital Asset Management. "Specific stocks, in which people were underweight have outperformed," said Sankaran Naren, chief investment officer (equities), ICICI Prudential MF. When risk-on trade happens, beta (highly volatile) sectors gain traction, market observers said. Midand small-cap funds also posted lower growth advancing by nearly 6.5% in the month. This was also lower than the gains made by the BSE midand small-cap indices. 
    Funds that invest in stocks of FMCG (fast moving consumer goods) and pharmaceutical companies, which were among the best performers when the markets slid last year, have slipped in the performance charts in June. They gained by 6.3% and 5.2%. In a reversal of roles, funds that invest in banking and infrastructure stocks, the worst performers last year, gained the most advancing 11.8% and 9.7% respectively. 
    Industry officials, however, point out that equity MFs have outperformed indices so far in 2012 as well as in April-June. "Equity funds have done well compared to their benchmarks on a long-term basis," they pointed out. 
TOO STRONG TO FOLLOW? 

• Sensex, nifty gained 9% in June — their best performance since January 

• Large-cap funds gained 8.5% in the same month, while diversified funds advanced 7.1% 

• Overall, nearly 6 out of 10 large-cap funds posted gains lower than both benchmark indices last month