By Aditya Kalra
NEW DELHI, Sept 4 (Reuters) - IT sector funds were the top
performers in August among Indian mutual funds that focus on
domestic stocks as lower valuations of the sector's shares after
their sharp declines in July revived investor interest.
India's benchmark stock index gained 1.1 percent
in August, but IT stocks outperformed as the BSE IT index
surged 8.3 percent after falling 7.3 percent in July,
with shares in India's top software services firm TCS
rising 8 percent, and rival Infosys gaining 6 percent.
"IT is now fast becoming a stock-specific scenario," said
Waqar Naqvi, chief executive of Taurus Mutual Fund, adding that
the outlook for the sector will be "neutral" in the coming
In August, IT funds gained almost 6 percent on average, with
Franklin Infotech Fund registering a rise 7.5 percent to top the
category, data from fund tracker Lipper, a Thomson Reuters
(For complete table of fund returns, click )
Volatile market conditions also prompted investors to flock
to defensive sectors, helping the pharma and the FMCG
(fast-moving consumer goods) category of funds to appear among
the top gainers for the month.
Gains of 4.6 percent in the BSE healthcare index
helped pharma funds clock an average rise of 5.1 pct, while FMCG
funds gained 4.8 percent in August, on the back of a 6.9 percent
rise in the BSE FMCG index.
Among other schemes, international companies-focused AIG
World Gold Fund gained more than 10 percent to end as the
month's best performer, on the back of rising yellow metal
prices in August.
Banking funds were the worst hit during the month, ending
with average losses of 4.5 percent. Five of the six top India
fund losers were banking funds, Lipper data showed.
DIVERSIFIED EQUITY FUNDS
India's quarterly GDP grew at a slightly
better-than-expected 5.5 percent in the June quarter, dashing
investor hopes of an early rate cut by the central bank, as
inflation continues to remain at stubbornly high levels.
Slowing growth in Asia's third-largest economy and
uncertainty about passage of reforms after a parliament deadlock
over a state auditor's report on misallocation of coal blocks
kept investors on the edge in August.
Diversified stock funds, which represent the biggest
category of stock funds in India by number and assets, ended
with small gains of 0.4 percent in August.
While the main index managed to eke out gains, the BSE
mid-cap index ended marginally in the red while the
small-cap index lost almost 1 percent.
These losses also weighed on such funds' unit values as mid-
and small-cap stocks accounted for more than a third of their
assets as of end-July, data from Morningstar India showed.
Some analysts said Indian markets will continue to be
range-bound going ahead, and the political deadlock is likely to
"Politics as of now is a more important reason rather than
economics as far as the markets are concerned," Naqvi of Taurus
Mutual Fund said.
(Editing by Muralikumar Anantharaman)