Biggest losers: Mid- and small-cap funds

FUND REVIEW

It has been reported that this year ice had melted more around the world than, in any other year. The year 2008 has been marked by meltdowns of all kind in the Indian capital markets too. The Sensex has had the ubiquitous red by its side almost all year and the colour just got darker when the global financial crisis took birth in the US in September and spread its wing to India as well.

While the Sensex has suffered such a fate, the performance of the equity mutual funds has predictably been on the same path. Though the funds haven’t been affected by the liquidity crisis so far, they have been reduced to mute spectators of the bear onslaught on the markets.

No equity diversified fund has posted positive returns between January 08, 2008 and October 21, 2008. In such a scenario, we thought it would be interesting to take a look at the funds that have borne the brunt the most. We take a look at the year’s five worst performing equity diversified funds.

JM EMERGING LEADERS

JM Emerging Leaders, with a name that is a stark paradox to its performance, is 2008’s worst performing equity diversified fund. The fund has a mandate of investing in emerging companies. Such a mandate means that the fund has maximum exposure to small-caps. However, though the fund’s performance is unnerving at present, it has potential because some of the stocks that the fund holds are on the path of emerging as winners in the future.
 

JM EMERGING LEADERS
Stocks	% Assets

Mphasis10.61 Bartronics India8.81 3i Infotech7.31 Sintex Industries7.15 XLTelecom & Energy6.90

JM SMALL & MID-CAP REG

This fund has a very broad definition of mid- and small-cap stocks but it has still stayed invested in pure mid- and small-caps. This reluctance to alter its strategy in falling markets has resulted in the fund’s dismal performance. Going forward, it would take a sustained rally in the mid-cap segment for the fund to recover from the losses. However, when we consider the outlook of the markets, the fund seems to be facing a very bleak future.
 

JM SMALL & MID-CAP REG
Stocks	% Assets
Tulip Telecom Ltd.	16.43
Bombay Rayon Fashions Ltd.	13.90
Hanung Toys & Textiles Ltd.	11.57
Sintex Industries Ltd.	8.97
Apollo Tyres Ltd.	8.71

JM BASIC

Yet another JM fund in the bottom of the ladder. This fund has been very impressive when the times have been good but has stuck to its convictions and not gone like other funds. The fund manager has taken some bold stock and sector allocations and hence the fund is heavily exposed to construction and basic engineering. However, JM Basic’s has always been a high-risk, high-return proposition and has lived up to its calling.
 

JM BASIC
Stocks	% Assets
Bharat Heavy Electricals	10.48
Punj Lloyd	7.58
Bombay Rayon Fashions	7.55
Sintex Industries	6.26
PSL	5.90

MAGNUM MIDCAP

Occupying the fourth lowest position is Magnum Midcap, a fund with a mandate to invest in mid- and small-cap companies with capitalisation less than the last stock of the Nifty. The fund was an above-average performer during the bull run but when the markets went in the downward cycle, the fund had nowhere to go except down. And with a high-risk portfolio of mid- and small-cap stocks, the fund will try the patience of its investors in the coming times.
 

MAGNUM MIDCAP
Stocks	% Assets
Lupin	5.93
Gujarat Mineral Devp. Corpn.	5.41
Thermax	4.79
Piramal Healthcare	4.19
Maharashtra Seamless	4.09

JM HI FI

JM’s fourth fund in the five worst performing funds of the year is JM Hi-Fi — a thematic fund with financial services and infrastructure as its chosen sectors. The aggressive strategy followed by the fund manager has not been successful and only increased the risk factor. Both the themes were subject to tremendous selling pressures. With the slowdown in infrastructure and liquidity crunch in money markets, the fund will remain an underperformer for some time to come.
 

JM HI FI
Stocks	% Assets
Punjab National Bank	8.20
Punj Lloyd	7.29
Union Bank of India	6.95
Bank Of Baroda	6.85
Larsen & Toubro	6.74