India: Fund Numbers Recover

It seems it is proving very hard to kill this bull. Indian markets have come back strongly in the last few weeks, an d performance data of mutual funds and FIIs both is beginning to look decent once again.

The BSE Sensex is up 11% over last one month, and is up around 26% over a 12 month period. Most funds have risen in line with that. All domestic mutual funds are up over the last one month, with gains ranging from 4% to 18%. While funds are still down over last 3 and 6 months, the drops don’t look so bad anymore. Over last 3 months, funds are down around 3 to 5%, and over last 6 months the are down around 5 to 20%, with most clustered around -10% for 6 months. Over last one year, fund returns look good. While BSE Sensex is up 26% over last 12 months, funds are up anywhere from 10% to 50%. The large funds like Reliance Growth or HDFC Growth Fund are up around 35-40%, over ahead of the market.

Leading FII funds have recovered well. HSBC GIF-India Equity fund, one of the largest public funds with an asset base of around $6.4bn is down only 2% over last 3 months and is up around 35% over a 12 month period. JPMorgan India Fund is down 9% over 3 months, and is up around 20% in last one year. Aberdeen GI India Opportunities fund is down only 3% over a 6 month period, while it is up 20% over a 12 month period. Data for some of these foreign funds is in their local currencies, so movements of these currencies against the rupee impacts these returns. For example, dollar’s appreciation in the last few months would have depressed these returns. Despite that, the returns look far less gloomy than they did a few weeks ago.

This should suggest that funds would be beginning to see money starting to come back. The large FII funds certainly don’t seem to have faced much of redemption pressure as a result of the market fall from January. Their assets under management don’t seem to have fluctuated any more than can be explained by market movements. For example, JP Morgan India Fund’s assets under management [AUM] as on 2 May were $3.7bn, up 12% from its AUM as on Mar 31. This is roughly in line with market movement. Similarly Nomura’s India fund seems to have $140bn yen under management, up around 30% from a year ago. This again seems in line with market movement, so the fund may not have suffered too much of redemptions in the turmoil of the last 3 months.

The affect of recovery in performance numbers could mean less chances of redemption induced selling pressures in the immediate future. In fact, the numbers look almost good enough for money to start flowing in, both for FIIs and mutual funds.

In the last 2-3 months, funds have in a defensive mode. Some of the key FII funds mentioned here seemed to be overweight on sectors like IT, consumer staples and healthcare, all considered less volatile sectors. With bad news receding somewhat, this stance could be ready for change. One fund manager report for April for instance talks about marginal shift from defensive sectors to growth.