A good week for debt funds, equity peers head south

Equity funds, except FMCG and auto, were in the red zone

It was a week when debt funds did better than equity funds. Faced with a sharp downturn in equity fortunes, equity funds fared poorly during the week ending August 26.

While all debt categories managed positive returns for the week, equity funds, barring FMCG and auto sector funds, ended up in the red. FMCG funds had given negative returns in the previous week.

FMCG funds led the way with 0.49 per cent return in the week, followed by auto sector funds at 0.11 per cent. All other equity fund categories ended the week in the red. 
 

Leading the Debt Charge Average returns in % as on August 26
Equity funds	1 week	1 year
FMCG	0.49	85.45
Auto	0.11	59.04
Technology	-0.22	50.50
Tax Planning	-0.48	77.62
Diversified	-0.62	63.99
Petroleum	-1.07	22.21
Pharma	-1.24	47.27
Index	-1.42	48.71
Banking	-2.69	78.69
Debt funds	1 week	1 year
Income funds	0.14	3.28
Floating rate	0.10	5.27
Short term funds	0.10	5.30
Liquid funds	0.10	4.90
Mid term funds	0.08	4.82
Gilt - short term	0.07	4.04
Gilt long term	0.05	3.60
MIPs	0.00	11.14

Banking sector funds were the worst affected as they posted negative returns of 2.69 per cent for the week. Index and pharma funds were the next worst performers.

FMCG funds continued to top the yearly return stake with an average return of 85.45 per cent. The next best in the equity category for the past 12 months were banking sector funds (78.69 per cent) and tax planning funds (77.62 per cent). Petroleum sector funds continued to be at the bottom, returning 22.21 per cent on an average in the past 12 months.

In the debt category, income funds made a surge to the top during the week, bouncing back from the bottom of the table in the previous week. The average income fund returns amounted to 0.14 per cent.

These were followed by floating rate funds and short-term funds at 0.10 per cent each. As their equity portfolio failed to fire, monthly income plans (MIPs) did badly, sliding from top of the table in the previous week.

However, MIPs topped the chart as far as 12-month returns were concerned. The average 12-month MIP return amounted to 11.14 per cent, far outstripping short-term funds, the next best in the debt category at 5.30 per cent. In the pure debt category, funds with a short term maturity continued to perform better than others.

As opposed to their weekly performance, income funds were the worst performers in the debt category on a yearly basis, with average returns amounting to only 3.28 per cent.

However, with the oil prices at record highs, fund managers have noted that the interest rates rise, which should see log -debt funds performing better.

According to Rahul Pal, assistant fund manager at Sundaram Mutual Fund, interest rates are likely to remain stable but would depend on the pass through effect of fuel prices in the domestic inflation.

"With high oil prices stoking inflation fears and good industrial growth numbers, a possible northward bias to interest rates remain," he added.