Mutual fund mangers reverse investment bets
This comes after most MF equity schemes missed the current rally
The current rally in the stock markets has forced Indian mutual fund managers to churn their investment portfolios fast. Upon finding their calls backfired and without making any quick gains for investors, they have chosen to again invest heavily in those sectors where they had cut their exposure in August.
For instance, in bank shares where fund managers drastically cut their proportion of investments in August by over 100 basis points (one basis point is one hundredth of a percentage point), the segment is now back on their radar. Interestingly, exposure in banking shares rose by 160 basis points to 19.27% in September according to statistics released by the capital markets regulator Securities and Exchange Board of India (Sebi).
Similar reverse calls were seen in sectors like information technology, fast moving consumer goods (FMCG) and pharmaceuticals. In all these sectors, fund managers took a call, which is contrary to what they did a month back.
Chief executive officer (CEO) of a mid-sized fund house had admitted in a conversation with Business Standard that the industry missed the rally on the back of investment decisions, which did not help investors make gains out of the current rally.
"We were late and now we are buying into bank stocks when shares have risen already," he had said.
Banks, IT, FMCG and Pharma altogether constitute close to 44% of industry's overall investments in equities. And wrong investment decisions in these sectors ensure poor performance of the funds. This was true in this case too.
Business Standard had reported last week how close to 70% of the equity schemes (excluding sector funds) offered by the mutual fund industry could not beat the BSE 500. In absolute terms, out of such 333 schemes only 106 could outperform the index while others showed a lackluster show.
Such an underperformance came at a time when Sebi has been asking fund houses to improve their track record. On top of it, even industry's executives say that fund performance is key to attract investors to mutual funds apart from brand image.
Barring the top four favourite sectors of fund managers, auto shares witnessed a rise of 22 basis points in investment exposure while cement, construction projects and industrial capital goods too saw positive traction in September.
In September, equity assets invested in stocks stood at Rs 2,00,387 crore against Rs 1,86,700 crore in the previous month.
| Deployment of equity assets in top sectors | |||
| Sector | July 2012 | August 2012 | September 2012 |
| Banks | 18.75 | 17.66 | 19.27 |
| Software | 8.64 | 9.71 | 9.00 |
| Pharma | 8.29 | 8.84 | 8.02 |
| FMCG | 7.70 | 8.05 | 7.57 |
| Auto | 4.20 | 4.24 | 4.46 |
| Cement | 3.09 | 3.30 | 3.42 |
| Capital Goods | 2.95 | 2.84 | 2.96 |
| All figures in % of equity AUM | |||
| Source : Securities and Exchange Board of India (Sebi) | |||