A disastrous month for the equity markets; the markets which were seeing no signs of slow down suddenly went into doldrums. Sensex plummeted massive 13.65% in a month to close below 11000 mark and Nifty lost 13.67% to close at 3071. All in all Fed rate increase, viscious circle of margin call, huge outflow by FIIs, weak global markets triggered the fall. The Sensex that set a new record of 12612 on May 10 succumbed to bears by the middle of the month and the extent of fall turned out to be so steep that Sensex hit lower circuit of 10% on May 22 swinging over 1100 points in a single day. Overall the market remained extremely choppy and yo-yoed from 12042 in the beginning to 10398 at the end of the month. The performance of sector indices has been even worse. BSE Metal which was the best performer last month with a return of 25.69% lost 19.44% while BSE FMCG was down 18.27%.BSE Bankex and BSE IT were least volatile among sectoral indices and slid 9.07% and 9.72% respectively.

FII’s emerged as big sellers in the equities this month and sold equities worth Rs 7354 crore in contrast to Rs 18476 crore of the net investment till April. MFs continued to pour the money and tried to hold the markets with net investment of Rs 7573 crore, higher than what FIIs pulled. Mutual Funds have invested more than Rs 100 billion in last two months.

Mutual Funds managed to outdo the broad base indices .Out of the 152 diversified equity schemes considered, 118 schemes (i.e. 77% of the total schemes) lost less than Sensex and Nifty. Diversified Equity Funds on an average lost 12.29%. Banking Funds and Infotech Funds which were the slow movers in recent bull rally preserved the downside better and lost 5.4% and 9.9% respectively. However MNC Funds and Auto Funds were the biggest loser with negative returns of more than 13%

Though stock markets tanked the mutual fund Industry AUM for the month of May has increased by 7.1% from Rs.258031 crore to Rs 276342 crore indicating that investor seems to ignore the recent slump. Prudential ICICI Mutual Fund reported the highest increase in the corpus in absolute terms by Rs 4647 crore and has moved to the top position replacing UTI Mutual Fund. With this Prudential ICICI Mutual Fund has now become the largest AMC with total assets under management at Rs 32150 crore. Benchmark Mutual Fund witnessed the highest increase in the corpus in percentage terms by 59% from Rs 781 crore to Rs 1244 crore. SBI Mutual Fund was the biggest loser in absolute terms by Rs 835 crore and Escorts Mutual Fund in percentage terms by 26%.

Top 5 AMCs w.r.t Assets under Management as on May 31, 2006

Equity Linked Saving Schemes (ELSS)

Alike broader market scenario all the schemes in ELSS category posted negative returns. The category lost more than the average Equity Diversified Funds for the considered month. HDFC Long Term Advantage Fund lost least in the category down 10.27% followed by DBS Chola Tax Saver at 10.42%.

Balanced Funds

Monthly Income Plans, hybrid funds having marginal equity exposure were also fazed by the negative sentiments and the category lost 1.55%.Only five funds out of the 42 funds in the category posted positive returns. ING Vysya MIP Plan was the top fund with absolute returns of 0.45%. BOB MIP Fund was the second best performer with returns of 0.35%.

Income Funds

The yield on the benchmark 7.59 per cent GOI 2016 inched up by 17 basis points to 7.65% at the end of the month. The impending auction, Fed rate hike which led to interest rate hike fears in the domestic debt market and the rupee’s fall pushed up the bond yields and eased bond prices. Also proposed hike in domestic fuel prices which may lead to spike in inflation and in turn interest rates weighed on the sentiment.

In the Income Fund category, Franklin India International Fund was the best performer posting impressive returns of 2.03% vis-à-vis category average returns of 0.46%. Benchmark Derivative Fund was the next topper with average returns of 1.29%.

Liquid Funds

Call rates ended flat at 5.5-5.6% compared to a month earlier. The liquidity situation remained comfortable during the month as RBI continued to infuse the funds through auction.

In the Liquid Fund Category DWS Money Plus Fund from Deutsche Mutual Fund was the top performer giving absolute returns of 0.630%.Prudential ICICI Liquid Plan FII at second position followed it with average returns of 0.599 %. While the category returned 0.519%.