Bank & FMCG funds outshine diversified funds in FY11

Large cap and diversified schemes lag behind in FY11, high exposure to mid cap stocks by ELSS put them in a spot

Mumbai: Sector funds like banking, FMCG and Technology schemes have brought cheer to investors face this year. Bank and financial sector funds lead the pack by delivering 35 per cent average return in FY11 by outperforming their benchmarks. The BSE Bankex index has gained 25 per cent while CNX Bank has increased 24 per cent in FY11.

The top performers among banking sector funds were Reliance Banking (38%), followed by Sundaram-Select Thematic Funds (28%) and UTI Banking Sector (27%).  Experts say increased exposure to PSU banking stocks has helped boost the performance of these funds.

“Defensive sectors like FMCG were preferred during the correction and they were not hit very badly during that phase. Banking stocks fell significantly during the correction phase, but they recovered smartly in the following rally since mid February. Both these sectors benefitted from better economic prospects.” says Dhruva Raj Chatterji, Senior Research Analyst, Morningstar India.

The FMCG sector funds moved in line with their benchmark by posting 24 per cent average returns in FY11. Among the FMCG category, funds like Franklin FMCG and ICICI Pru FMCG posted 24 per cent returns. “Fund houses have increased exposure to PSU bank stocks which have done well and that has further helped banking funds,” points out Dhruva.  

Tax saving schemes have generated an average of 9 percent returns in FY11. Experts say increased exposure towards mid and small cap sectors is the reason for the relatively average performance.  

“The mid and small cap stocks got battered between November 2010 and February 2011. Performance of ELSS funds got adversely affected due to their higher exposure to mid & small cap stocks. These funds have however now toned down exposure to these stocks considerably. Due to the relative underperformance of ELSS funds, inflows in these schemes have been affected,” shares Dhruva.

Funds like Reliance Tax Saver, HDFC Long Term Adv, Kotak Tax Saver and Religare Tax Plan have 13 to 22 percent exposure towards mid cap stocks.

Banking and FMCG funds have outperformed large cap and diversified schemes which delivered an average of 9 percent an 8 per cent returns respectively.   Quantum Long Term Equity and HDFC Top 200 Fund were among the top contenders which delivered 19 and 17 percent returns respectively in FY11.  

Gold ETFs have also put up a great show in FY11 by delivering and average of 26% returns on the back of galloping gold prices. Gold ETFs attracted Rs 2,250 crore net inflows in FY 11 compared to Rs 804 crore last year. Indian gold prices have shot up 28 per cent from 16,400 in April 2010 to 20,787 in end-March 2011.  

Other ETFs tracking Sensex and Nifty posted 17 percent returns. They mopped up Rs 1,388 crore net inflows this year compared to net outflows of Rs 20 crore last year.

Technology funds made a comeback this year by posting an average of 17 per cent returns after a lackluster performance since 2005.  Pharma funds delivered 13 per cent average returns even though Pharma was the outperformer in the sector fund category in FY 2010.

“The performance of technology funds was long due. None of the technology stocks were coming up since 2005. Media and Entertainment funds may do well this year,” says Neeraj Bahal of Fasttrack Investments.

Among the other sector funds, media, energy and infrastructure funds continued their lackluster performance.