While the Sensex and Nifty seem to struggle to reach the highs of Jan ’08, some mutual funds have shown a stellar performance as their NAVs crossed the previous highs hit in early Jan ’08.
The Indian stock markets peaked out on a closing basis on January 8, 2008 when Nifty closed at 6272. On July 8, 2010, Nifty is at 5352, which is a decline of 15% since then.
The list of equity MFs that have crossed their January 2008 peaks are given below. Clearly, there is a case of active fund management in India. In the list below, reason for out-performance of MNC-focused funds can be partially attributed to delisting and buy back angle. The encouraging factor is that a large number of large cap, diversified funds have beaten the market.
Click here for 'Mutual Funds- Beyond Market Risk'
During the same period, we have tried to analyze how different sectors have performed. The BSE Auto index has zoomed ahead by 47% from the Jan 2008 levels. The other prominent BSE indices, which gained include BSE FMCG (up 29%), BSE Healthcare (up 34%) and BSE IT (up 27.7%). The CNX IT and CNX PSU gained 34% and 9% respectively.
The big laggard has been realty sector down 76%. While in cities like Mumbai, real estate prices have crossed previous peaks, share prices are still languishing. Does the stock market know something that the home buyer is unaware of? Clearly, if one believes in efficient markets hypothesis, real estate prices have to correct.
Click here for 'Indian Indices - After Jan' 08 highs, autos accelerate, realty bites'
And if you thought the mid-cap space is outperforming, the indices tell a different story.
The CNX Mid-cap index is down 12% while BSE Midcap is down 26.1%.
The other sectoral laggards are capital goods, consumer durables, metals, oil & gas, power and infrastructure. I think investors have lost patience with infrastructure sector as the gestation period between thoughts to results has taken time. For the coming year, a big contra call will be to go overweight on infra as slowly and steadily the building blocks seem to appear in place.
Click here for 'Nifty - a mixed bag since Jan 2008'
A glance at Nifty constituents of Jan ’08 reveals that half the Nifty components are in the green led by Hero Honda (up 215%). Interestingly, stocks like Dr, Reddy’s (up 114%) and Glaxo (108%) are no longer part of the Nifty 50; the pharmaceutical pack appears to be in good health. The big underperformers include telecom, which seemed disconnected following huge competition leading to a fierce price war. Investments in 3G will further add to the sector woes. The biggest losers have been Unitech and Suzlon, which are still down over 80% from their previous peak. Both these are victims of leverage – and unlikely to show improvements soon.
This is not to suggest that putting money in a mutual fund will guarantee better returns than most of the benchmarks. After all as the mutual funds themselves say - “Past performance is in no way a guarantee of future performance.”