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Tuesday, February 2, 2010

Mid, small-caps soften blow to equity funds in Jan

Equity funds recorded a drop in net values in January, but nearly all of them fell less than the country's benchmark share index on lower losses in mid and small-caps and big bets on energy, bank and technology stocks.

Diversified equity funds, the largest group of stock funds by number and assets, lost 4.2 percent on an average.

By comparison, India's main stock index fell 6.3 percent on foreign portfolio outflows, concern over the strength of global economy and fears of Chinese policy tightening. Nearly 95 percent of India's 325 diversified stock funds lost less.

"Most of these equity funds had higher allocation to banking and technology sectors, which did well as compared to broader index like Sensex," said Chintamani Dagade, a senior research analyst at Morningstar India.

"Also, exposure to energy companies worked in their favour during the month."

The three sectors collectively accounted for about 40 percent of diversified equity fund assets at the end of December, data from mutual fund tracker ICRA Online shows.

In January, while the bank and tech stocks as measured by the BSE Bankex and BSE IT indices lost 4 percent or less, the BSE Oil and Gas index fell 5 percent.

A relatively lower decline in shares of medium and small firms, with the BSE Mid Cap and BSE Small Cap falling 3 percent and 1.5 percent respectively, also softened the blow from sharp falls in the funds' large cap portfolios.

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