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Technology funds make a comeback in December
January 20, 2011

The FEFI December Update


Author : iFAST Research Team



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Equity funds on the Fundsupermart.com platform have clearly outperformed the BSE SENSEX during several months of 2010 (as seen in chart 1). In last one year, FEFI has outperformed SENSEX, returning 18.4% in comparison to 17.4% returns from SENSEX.

However in December, the funds underperformed SENSEX by 2.9% with FEFI giving a return of 2.16% whereas, SENSEX delivered 5.06% returns in December. The underperformance of mutual funds in November and December has virtually taken out the additional returns that FEFI had given over SENSEX. Currently, FEFI has outperformed SENSEX by 0.97% on a one year basis.

FEFI PERFORMANCE UPDATE

FEFI opened December with2162 points and closed the month at 2168.5 points gaining 45.8 points, or up by 2.16% on a month-on-month basis. FEFI moved upwards for the first two days of the month and reached the month high of 2179.1 points on 2 December and then fell to the month’s low of 2054.2 points on 9 December, before closing the month at 2168.5 points. The month’s closing figure is 10.6 points lower to the month’s high and 114.3 points higher than the month’s low. In a matter of seven days, FEFI lost 124.9 points from the month’s high value of 2179.1 points to the month’s low value of 2054.2 points.

Chart 1:  performance of FEFI AND SENSEX for 2010

Table 1: FEFI Index levels

FEFI

Year-to-date (%)

Month-to-date (%)

31 December 2009 1831.56 - -
31 January 2010 1763.09 - -3.7%
28 February 2010 1745.48 -4.7% -1.0%
31 March 2010 1868.57 2.02% 7.05%
30 April 2010 1916.83 2.58% 4.66%
31 May 2010 1850.36 1.03% -3.47%
30 June 2010 1939.67 5.90% 4.83%
31 July 2010 1976.86 7.92% 1.91%
31 August 2010 2026.32 10.63% 2.51%
30 September 2010 2181.22 19.09% 7.64%
31 October 2010 2204.49 20.36% 1.07%
30 November 2010 2122.76 15.89% -3.71%
31 December 2010 2168.514 18.40% 2.16%

FII Flows Stagger

Foreign Institutional Investors (FIIs) continued to pump in money into Indian stocks but the inflows have reduced by huge margins in comparison to the inflows seen earlier in October and November.  In December, the FIIs have made a net investment of about US$ 0.45 billion (INR 2,049 crore) into Indian equities in comparison to  US$ 4.12 billion (INR 18,293 Crore) in November and US$ 6.42 billion (INR 28,563 Crore) net investment made in the October. During this calendar year, FIIs have pumped in close to US$ 29.36 billion in the Indian Equity market. This is the largest ever inflows from the FIIs into the Indian equity market.  

 The domestic mutual funds became net buyers in Indian equities and bought equities to the tune of INR 1,376 crore in December.  In 2010, domestic mutual funds have been net sellers to the tune of 28,132 crore except for the months of May and December.

 Mid and Small-caps underperform

 Unlike November, wherein a few sectoral indices like BSE Auto, BSE Healthcare and BSE Technology gave positive performance, most sectoral and broad indices have given positive returns in December. The BSE SENSEX and NIFTY gave 5.06% and 4.64% returns respectively. Even, most of the broad indices like the BSE 100, BSE 200, BSE 500, CNX 100 and CNX 500 have given positive returns in the range of 3.10% to 3.83%.

Chart 2: FII Inflows in 2010

The BSE Smallcap and BSE Midcap indices have delivered returns much lower than SENSEX or other broad-based indices. The BSE Midcap gave 0.5% returns while the BSE Smallcap gave a negative return of 0.76%. On a one year basis, most of the broad based indices, BSE Mid cap and Small Cap indices have underperformed SENSEX. The one year returns for broad-based indices are in the range of 15.66% to 17.91% while, the returns of BSE Midcap and BSE Smallcap are 16.15% and 15.71% respectively.

Technology sector leads

Table 2: Top 5 Equity funds on our platform in December

  Sector Month To Date Returns Year To Date Returns
ICICI PRUDENTIAL TECHNOLOGY FUND Technology 9.6% 44.5%
DSP BLACKROCK TECHNOLOGY.COM FUND Technology 8.6% 15.5%
BSL NEW MILLENNIUM FUND Technology 8.4% 16.6%
DSP BLACKROCK NATURAL RESOURCES AND NEW ENERGY FUND Power 6.7% 19.5%
MIRAE ASSET GLOBAL COMMODITY STOCKS FUND Overseas 6.64% 7.54%

Funds focusing on the Information Technology sector have topped the list for the equity segment in the month of December. However, none of the best performing technology funds were able to deliver better returns than BSE IT Index or CNX IT Index in December.  In December, the BSE IT Index and CNX IT Index gave 12.0% and 11.7% respectively.

Despite US Congress signing a bill to tax outsourcing services which is expected to increase expenses of Indian IT companies, the IT sector stocks have performed well as the market is expecting good quarterly results.

The top performing fund from the equity segment in December was ICICI PRUDENTIAL TECHNOLOGY FUND with a Month-to-Date (MTD) performance of 9.60% and a Year to Date (YTD) performance of 44.50%.


Table 3: Bottom 5 Equity funds on our platform in December
Sector Month To Date Returns Year To Date Returns
RELIGARE BANKING FUND Banking -2.67% 38.53%
JM SMALL & MIDCAP FUND Midcap & Small Cap -2.76% -2.57%
UTI BANKING SECTOR FUND Banking -3.58% 30.53%
RELIANCE BANKING FUND Banking -3.59% 46.08%
SUNDARAM FINANCIAL SERVICES OPPORTUNIES Banking -3.64% 35.51%

The bottom performing funds list is mostly composed of banking funds. In December, the BSE BANKEX and CNX Bank Index fell by 1.80% and 1.30% respectively. Also, all the banking funds in the bottom performing list have underperformed both the Banking indices.

The banking stocks fell in December as banks have increased their fixed deposit (FD) rates. The hike in FD rates may lead to lower profit margins if the banks are not able to increase their lending rates soon. This fear has led to the negative performance of banking stocks in December.

The bottom performing fund for December was SUNDARAM FINANCIAL SERVICES OPPORTUNITIES FUND with -3.64% returns in December.

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FEFI Update - October
FEFI index methodology.


iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's offer document/scheme additional information/scheme information document. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer in the website.


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