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Mfs Have Outdone Stocks: Study

Aditya Chatterjee  |  BSCAL 

About 38 per cent of the close-ended mutual fund schemes are quoted at or above their par value.

This is in sharp contrast to the fact that only 21.79 per cent of all the listed scrips on the Bombay Stock Exchange(BSE) are quoted at or above Rs 10.

A study prepared by H Sadhak, deputy general manager, LIC Asset Management Company, has cited these figures to prove that mutual fund schemes have performed badly compared with the stock markets.

The figures are a revelation in the backdrop of mutual fund schemes facing a lot of flak because of alleged "underperformance" of fund managers.

The study has stated that only 1,311 scrips (or 21.79 per cent of the about 6,016 scrips listed on the BSE) are quoted at or above Rs 10.

The corresponding figures in the mutual funds sector show that 22 (or 37.93 per cent) of the 51 listed and quoted close-ended mutual fund schemes were priced at or above their par value.

Given the fact that out of the 1,311 scrips, 710 stocks come from the Bombay Stock Exchanges's A and B1 group stocks (which are considered "expensive" as far as the small investor is concerned), mutual funds have not performed so badly as it is made out to be, the study avers.

Sadhak commented: "While mutual fund units are typically targeted for small investors and lower income classes, the purchase price for the specified and B1 group stocks are mostly beyond the means of this class of investors."

Sadhak further said a study conducted on the mutual fund industry some time back revealed that of the 88 mutual schemes operational till October 1996 (58 growth schemes, 16 balanced schemes and 14 income schemes), all the income schemes managed to beat the Bombay Stock Exchange national index by 18.01 per cent.

While all of the 16 balanced schemes also managed to beat the index (this time by a narrow margin of 1.12 per cent), only 25 (or 43 per cent of 58 growth schemes) could beat the index.

"The poor performance of the growth schemes are due to the prevalent bear phase, which continues even today. In this context, the overall performance of mutual fund schemes vis-a-vis the National index should be considered as quite good," Sadhak added.

Of the 2,530 companies quoted on the BSE as on February 7, 1997, 51.82 per cent were quoted at Rs 10 and above, 18.89 per cent were quoted at Rs 5 and above but below Rs 10, and a massive 29.21 per cent were quoted below Rs 5.

The corresponding figure in the mutual funds sector shows that out of the 51 quoted schemes, 43.14 per cent was quoted at Rs 10 and above, 45.1 per cent at a price above Rs 5 but below Rs 10, while the remaining 11.76 per cent was quoted below Rs 5.

The study also revealed that a higher percentage of listed schemes (87.9 per cent) was quoted as against 47 per cent of listed shares.

First Published: Mon, February 17 1997. 00:00 IST