Equity-oriented mutual fund (MF) schemes continue to offer high double-digit returns to investors. In the past one year, barring pharmaceutical funds, international funds and information technology (IT) funds, all other sectoral fund categories have not only yielded double-digit returns, but also performed better than the key stock indices. During the same period, the Nifty 50 and the BSE Sensex delivered returns of 13.48 per cent and 12.06 per cent, respectively.
Small-cap funds remains at the top of the pecking order, with a category average return of 24.4 per cent. Banking and infrastructure schemes, too, made over 20 per cent gain for investors. Large-cap funds continue to lag, as several frontline stocks are still struggling. Pharma funds are the worst hit, with nearly 15 per cent erosion. However, recently, fund managers have started picking up beaten-down pharma stocks from a two-three years' perspective. IT funds barely managed to remain in positive territory, with returns of just two per cent.
However, it is interesting to note that balanced funds, which are tilted more towards equity in their portfolio, have returned a reasonable 12.5 per cent. In recent months, investors’ preference for such funds is on the rise, given the historic highs in the stock markets.
This is being seen as a safe strategy by investors. Fund houses have been promoting balanced funds to investors in such times.
Though the equity schemes may have given quite robust returns in recent years, fund managers are continuously cautioning investors to tone down expectations. According to them, days of high benchmark-beating returns are over and investors should not expect more than three-four per cent returns against traditional investment avenues such as bank deposits.