mutual fund performanceAfter a long time, equity mutual fund investors had a reason to smile. Almost 80% of open-ended equity mutual funds beat the Sensex’s 3.5% return in September, showing that active management can deliver the goods. The best equity funds this month delivered 8-9% return in a span of 30 days after the government slashed corporate tax rates. Energy, consumption, infrastructure, and PSU oriented mutual funds ruled the roost in September. Read on.

The Winners

RupeeIQ looked at returns of 431 open-ended equity schemes in September. Only 89 funds failed to match Sensex’ 3.5% return this month, while 342 funds bested the equity index benchmark gains.

With just two funds, the energy sector equity mutual funds were among the best performers in September. The energy sector fund category with 8.13% average return was the biggest winner, with a good show by DSP Natural Resources and New Energy Fund and Tata Resources & Energy Fund.

As a thematic fund category, the consumption-oriented category benefitted in a big way from the euphoria around corporate tax cuts. The markets went up by around 8% in two days post the tax rate cut announcement, with consumption stocks stealing the show. The average return in this category was 6.89%, with top performers UTI India Consumer Fund, SBI Consumption Opportunities Fund and ICICI Prudential Bharat Consumption Fund delivering over 8% each.

Infrastructure oriented equity mutual funds, a category that never really delivered the goods, is known for surprises. Packed with high-beta stocks, such funds always out-perform when there is buoyancy in markets. The infra fund category delivered an average of 6.43% in September 2019, with BOI AXA Manufacturing & Infrastructure Fund, Sundaram Infrastructure Advantage Fund, and L&T Infrastructure Fund gaining 7-8% individually.

Closely following the infra pack was the PSU oriented funds. With just three schemes in the category, it is clear that both the fund industry and investors view it as a niche opportunity. PSU funds delivered an average 6.42% gain in September, with 6-7% gains individually by Invesco India PSU Equity Fund, CPSE Exchange Traded Fund, and SBI PSU Fund.

It was a month where smallcap fund investors regained some trust. The 21-fund smallcap fund category saw an average 5.63% gain, easily beating the Sensex. Pole performance was witnessed in Kotak Small Cap Fund, Union Small Cap Fund and IDBI Small Cap Fund, delivering in excess of 7% each.

Like the smallcaps, midcap equity funds have long been out of action. September 2019 proved to be different, with the 26-strong midcap fund category gaining 5.4% average return. The best performing midcap funds include Motilal Oswal Midcap 30 Fund (8.35%), Mahindra Unnati Emerging Business Yojana (7.78%) and PGIM India Midcap Opportunities Fund (6.85%).

Multicap fund category delivered 5.24% average return, with best performers being IDBI Diversified Equity Fund, JM Multicap Fund, and IDFC Focused Equity Fund. The ‘large & midcap fund’ category was a whisker behind with a 5.23% average return, with best performers being Sundaram Large and Mid Cap Fund, BOI AXA Large & Mid Cap Equity Fund and Principal Emerging Bluechip Fund.

Here is a table enumerating the category wise equity MF performance in September 2019.

Equity MF category No. of funds Average return % in Sep-2019
Energy 2 8.13
Consumption 12 6.89
Infra 21 6.43
PSU 3 6.42
MNC 4 6.17
Smallcap 21 5.63
Midcap 26 5.4
Multicap 57 5.24
Large & midcap 25 5.23
ELSS 37 5.13
Thematic 20 4.99
Banking 20 4.43
Largecap 108 4.26
Value-oriented 17 3.97
Dividend yield 6 3.85
International 38 -0.23
IT 5 -0.4
Pharma 9 -0.99

The losers

Three fund categories failed to gain in September; we are talking average returns. Pharma funds lost about 1% on an average.

IT funds also failed to generate positive returns on average, with corporate tax cut not having any major impact on them. They dropped 0.4% on average in September.

International funds too posted 0.23% average loss this month. DSP World Gold Fund and Kotak World Gold Fund lost 8-10%. Now it remains to be seen how October will pan out while the enthusiasm around corporate tax cuts has waned and the economic growth concerns have taken the centre stage.

Disclaimer: Views expressed here in this article are for general information and reading purposes only. They do not constitute any guidelines or recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide/investment advice / intended to be an offer or solicitation for the purchase or sale of any mutual fund.

Author
Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. He can be contacted on kumarsroy@rupeeiq.com