* Diversified stock funds perform better than benchmark
* Technology, banking sector funds among top performers
By Aditya Kalra
NEW DELHI, March 2 Diversified Indian
equity funds posted better returns than the benchmark index in
February, helped by small and medium-sized stocks that rose on
increased foreign and domestic buying.
Diversified funds, the largest category of stock funds in
India by number and assets, returned an average 4.8 percent in
the month, according to fund tracker Lipper, a Thomson Reuters
company.(For a table of fund returns, click )
These funds outperformed the benchmark index, which
rose 3.25 percent on robust inflows from foreign institutional
investors (FIIs) and hopes of easing monetary policy.
Favourable global liquidity conditions encouraged foreign
investors to buy more than $7 billion of Indian equities so far
in 2012, pushing up the index by more than 14 percent.
"With the backing of FIIs, retail participation increased in
mid- and small-caps, which pushed them higher," said R. K.
Gupta, managing editor at Taurus Mutual Fund. "However, the
outlook for these shares is likely to be cautious going ahead."
Mid- and small-cap shares accounted for more than a third of
the assets of diversified funds at the end of January, and
holdings of such stocks rose to the highest level since January
2011, Morningstar India data showed.
During the month, the BSE mid-cap index rose 8.8
percent while the small-cap index gained 6.14 percent.
Exposure to the financial services sector -- the top sector
bet for money managers, with an allocation of over 20 percent --
also helped equity diversified mutual funds as the Bombay Stock
Exchange banking index rose 5.12 percent.
Shares of top-lender State Bank of India gained 9
percent, while HDFC Bank rose 5 percent on hopes the
central bank will further reduce the cash reserve ratio for
banks to help ease tight liquidity conditions.
Two diversified funds from HSBC, the HSBC Midcap
Equity Fund and the HSBC Progressive Themes Fund, were India's
top performing mutual funds in February, returning more than 11
Among sectoral funds, those focusing on technology returned
more than 7 percent while those investing in financial services
registered a rise of nearly 6 percent.
IT stocks were among the best performers in February,
pushing up the BSE IT index by 6.6 percent.
"Indian IT companies offer a significant value proposition
to their international clients and offshoring of services will
increase over a period of time," said Nilesh Shetty at Quantum
Asset Management Co. "This will augur well for the sector."
Fixed income funds that invest in government
securities rose 0.75 percent in the month, as the yield on the
benchmark bond fell 7 basis points.
Gold exchange traded funds (ETFs) rose a little more than 1
percent on an average in the month.
(Reporting by Aditya Kalra; Editing by Ted Kerr)