Indian equity funds dip in Jan after 6-month gain

Many Indian equity mutual schemes posted losses in January after six straight months of gains, as foreign fund inflows slowed and investors pocketed profits in a market scaling all-time highs.

Many Indian equity mutual schemes posted losses in January after six straight months of gains, as foreign fund inflows slowed and investors pocketed profits in a market scaling all-time highs.

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Data from fund tracking firm Value Research showed 213 schemes investing in nine sectors, including oil, drugs, banks and autos, gave average returns from a fall of 7.1 per cent and a gain of 1.8 per cent, compared with a 0.7 per cent drop in the benchmark Bombay Stock Exchange index - Sensex.

The bad returns coincided with a paltry net $281 million invested in Indian equities in January by foreign funds, who have a huge bearing on the market, compared with the net $1.3 billion that flowed in from abroad in December.

"The market had adjusted to the reality check that these players had given," said Value Research managing director Dhirendra Kumar. "Also there was a good amount of profit-booking that took place."

Kumar expected the market to chart a steady course from now on after hitting an new high last month. The Government's move to allow private sector pension funds to invest up to five per cent of their corpus in equities would boost long-term sentiment in the stock market of Asia's fourth-largest economy, he added.

"This will have a profound impact on the market as stable and long-term money flows into equities, which our markets badly lacked," he said. "Mainly blue-chips are likely to benefit."

In the near-term, markets are expected to remain on a strong footing ahead of the presentation of Budget for 2005-06 on February 28, analysts say.

Funds investing in the personal care sector were the only ones that gave positive returns in the past month. Average net asset values (NAVs) rose 1.8 per cent, but fell short of a six per cent rise on the sector benchmark.

Technology schemes were down 0.8 per cent on average and diversified funds, the largest category with 104 schemes, fell 1.4 per cent on average compared with a two per cent fall in the wider S&P CNX 500.

Index funds lost 1.5 per cent on average, marginally higher than the 1.1 per cent loss on the S&P CNX Nifty. Average NAVs of funds investing in banks fell two per cent, and returns from specialty funds were a negative 2.2 per cent.

Schemes investing in autos were down 2.3 per cent on average compared with a 1.1 per cent fall on the sector index.

Petroleum sector funds lost 4.6 per cent on average, and schemes investing in the drug sector were the biggest losers -- down 7.1 per cent.