Sector data
124 funds below Rs 10
35 over three years old
Theme, tax and mid-caps suffer
That many stocks have plunged below their IPO prices isn’t surprising, as we take stock of markets in 2008. But did you know that mutual funds too have suffered the same fate? After the market rout, about one in three equity funds (124 out of 342 funds) today sport a NAV that is below Rs 10.
The surprising fact is that not all of these were new funds flagged off at the height of the bull market. As many as 93 of these funds are more than a year old, and as many as 35 of them have been around for more than three year
Investors usually shy away from funds with a higher net asset value; but it turns out they have fared better in the market crash.
Funds that sported unit values of less than Rs 10 fell an average 53.9 per cent this year, while those above Rs 10 fell by a lower 49.5 percent. But the gulf between the best and worst performing funds in the “sub-10” category was wide.
Birla Sunlife International Equity, contained its decline to 32 per cent, but the worst performer – JM Emerging Leaders – suffered a near-79 per cent erosion in its unit price.
The most-affected funds were theme or sector specific funds and tax-planning funds. Infrastructure and energy were key themes that witnessed a free fall this year.
New funds flagged off in the last 12-18 months saw their unit prices trimmed by 50-65 per cent.
Tax-planning funds too were prominent losers, thanks to several of them being biased towards mid-cap stocks. Even “contra” funds did not manage to buck the trend and lost between 42-70 percent.
One key lesson for the investor from 2008 is that if you are invested in theme funds, it may be best to quit when you are ahead.
If you can’t take an active approach, best to stick with plain vanilla diversified funds. Plus, a fund with a low NAV may be as risky as one with a higher NAV.
So before you rush to buy a fund at a “low” net asset value, evaluate it as you would evaluate one with a “high” NAV.
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