IT, metal, small-cap focused funds top MFs’ harvest

The last one-year period has brought bumper returns for mutual fund investors, that is seen once in a decade.

No less than 14 schemes have returned more than 100 per cent during the last one year period. Even the largest funds managed by HDFC Mutual Fund and ICICI Prudential Mutual Fund falling in the safer hybrid category balanced advantage fund have generated 40 to 60 per cent returns compared to around 60 per cent returns given by almost all large cap equity funds.

Mid-cap equity funds return range between 59 and 78 per cent while the small-cap equity funds have turned the table this year with 80-100 per cent or more in return for most of the funds in the sub-category.

Said Ravi Singhal, vice chairman, GCL Securities, "Such opportunities come once in ten years. After the 2008 financial crisis, select mutual funds had displayed similar performance in 2009. Otherwise, in general, one should not expect more than 15-20 per cent yearly return from the stock market and equity-oriented mutual funds."

“The BSE IT index has given a 101 per cent return in the last one year. Owing to the COVID-19 pandemic, IT stocks were investors choice, as these companies are getting mammoth deals. Owing to reasons such as an increase in the Work From Home (WFH), change in business tactics, use of Artificial Intelligence (AI), cloud, online advertising and social media, increase in internet consumption and many more, the IT sector remained an outperformer. Looking at these factors, IT stocks will remain agile during the pandemic," Singhal said.

The BSE Metal Index has given an outstanding return of 182 per cent in last one-year period.

“Due to the low-interest rates, metal demand has increased significantly across the world. As per recent data, home sales in the USA have remained the highest since 2007. Moreover, rising housing and infrastructure demand in China will further augment the metal demand. These factors are helping the metal sector to outdo this excellent performance for one more year,” Singhal said.

Small cap companies have displayed fairly good performance, the BSE small cap index return was at 99.51 per cent in the last one year.

“Due to the COVID-19 challenge, a limitation in boundaries is helping the small cap companies. Owing to a new taxation system, small companies are finding it easier to fight with large companies. On account of fewer imports from China due to the cold war situation and border tussles, small cap companies are immensely benefiting,” Singhal said.

The IT sector funds with over 100 per cent return as on April 27, include ICICI Prudential Technology Fund (154%), Tata Digital India Fund (113%), Aditya Birla Sun Life Digital India Fund (113%).

The small-cap funds include Quant Small Cap Fund (175%), Kotak Smallcap Fund (114%), Nippon India Small-cap Fund (102%).