Technology Funds returned an average of 29.5% in FY 2018, marking them out as a clear winner among mutual fund categories. Their performance was in stark contrast to Pharma which delivered -7% for the financial year. Investing outside India also proved to be a smart choice with international funds delivering 20.2% on average. However, this is a very diverse category and one of its components – international gold mining funds came out at the bottom of the pack. Banking struggled towards the end but still returned a decent 11.04% for the year. Infrastructure Funds also performed well with an 18.5% return.
|Fund Category||% in FY 18|
Source: Value Research. Data on 28/03/2018. Remaining days in 2018 are holidays.
Market cap categories
Among diversified funds, equity funds once again came out on top. Midcap funds delivered 15.2% followed by tax saving funds at 15%. Large caps also delivered a decent 11.8%. Debt funds delivered returns ranging from 7.6% for Credit Opportunities to just 2.6% for long-term gilt (government bond) funds. Gold rallied in the last three months but it wasn’t enough to lift its full-year return of just 3.8%.
|Fund Category||% in FY 18|
|Equity Tax Saving||15.0|
|Equity Multi Cap||14.4|
|Equity Small Cap||14.2|
|Equity Large Cap||11.8|
|Hybrid Equity Oriented||11.0|
|Debt Credit Opportunities||7.6|
|Hybrid Debt Aggressive||7.1|
|Debt Ultra Short Term||7.0|
|Hybrid Asset Allocation||6.9|
|Debt Gilt Short Term||6.8|
|Hybrid Debt Conservative||6.8|
|Debt Short Term||6.4|
|Debt Dynamic Bond||4.6|
|Debt Gilt – Long Term||2.6|
Source: Value Research, Data on 28/03/2018. Remaining days for 2018 are holidays.
The best performing fund scheme for FY 18 was interestingly enough, an international fund. The Edelweiss Greater China Offshore Fund returned 38.83%. The fund feeds into the JP Morgan – JF Greater China Fund, an international fund which invests in Chinese and Taiwanese companies as well as companies listed in Hong Kong. Alibaba Group is its largest holding followed by Tencent and Taiwan Semiconductor Manufacturing Co. Note that international funds are taxed like debt funds, which is 20% plus indexation for long-term (after three years) and as per slab rate for short-term (less than three years).
This fund was followed closely in performance by SBI Small and Midcap Fund with 37.7% and HDFC Small Cap Fund with 35.5%. Aditya Birla New Millennium Fund, a technology fund, placed 4th at 33.9% followed by Tata India Consumer Fund at 33.6%, highlighting India’s evergreen consumer story.
Among diversified equity funds, L&T Emerging Business (a small cap fund) came out on top with a 32.32% return in FY 18. It was followed by IDFC Focused Equity (31.08%) a multi-cap fund and BOI Axa Tax Advantage Fund (30.15%), an ELSS fund.
The bottom of the mutual fund categories contained a disparate lot. DSP Blackrock World Gold Fund which invests in gold miners across the world came out last at -15.13%. It was followed by Reliance ETF PSU Bankbees (-13.63%) and Kotak PSU Bank ETF (-13.60%), both public sector bank ETFs which were left reeling from the PNB scam. SBI Pharma Fund (-12.9%) followed at the fourth place from last, a victim of India’s pharma sector woes. Next in the list was another fund investing in gold miners – Kotak World Gold Fund (-11.74%).
Sector funds have once again proved how rapidly they move in and out of fashion. Pharma was the darling of the market in FY 14 and 15. From there it has moved down the ranks to hit the very bottom in FY 18.
Diversified equity funds have done well, true to their promise. However, the market has faltered in the last three months and the full effect of this might only be seen in the next financial year. Debt funds returns were poor, as a result of higher government borrowing and rising rates abroad. Their future trajectory is unclear – government borrowing and rate movements abroad will have to be watched carefully.