Equity funds underperform the rise but buck the fall during the recent round trip of the Sensex

The Sensex rose more than 2,000 points in the Feb-April period and then gave up all the gains thereafter in April-May. How did equity funds do during this period?

The Sensex went up from 15,725 on 5th February this year to its peak of 18,047 on 7th April and quickly fell back to 15,960 on 25th May. The mutual fund sector's performance in this round trip was a study of contrasts. In the rally of 14% in the Feb-April period, only 49 equity diversified growth schemes out of 216 schemes outperformed their respective benchmarks.

This stands in sharp contrast to the performance during the decline of 11% in the April-May period when as many as 174 schemes outperformed their benchmarks. This shows that funds have been conservative with their portfolio construction. By and large they have stayed away from highly volatile stocks that ensured an outperformance during the recent market decline.

The top performer among the 216 schemes during the rally was Canara Robeco Force Fund. Its Net Asset Value (NAV) was up 17% over the period while its benchmark, S&P Nifty was up 14%. Birla Sun Life Long Term Advantage Fund - Series 1 was second with NAV rise of 16%, while BSE500, its benchmark, changed 13%. Templeton India Growth Fund (up 16%), Escorts Growth Plan (up 15%), IDFC Strategic Sector (50-50) Equity Fund-Plan A (up 15%) were among the top five. Out of the 49 schemes, which outperformed their benchmarks, 21 schemes have beaten the Sensex.

Schemes of JM Financial Mutual Fund have been laggards in any market scenario. It repeated this unique distinction during this short rally too. JM Core 11 Fund, JM Emerging Leaders Fund, JM Small & Mid-Cap Fund were among the bottom five. Their NAV yielded a return of 6%, 5% and 3% respectively while their benchmark BSE Sensex, BSE200, CNX Midcap were up between 13-14%. Sahara REAL Fund and SBI Magnum Midcap Fund were the others in the bottom five. Their returns rose 7% and 6% respectively.

Following this rally, the Sensex tumbled 11% between 7th April and 25th May. In this fall, out of the 216 schemes, the NAVs of two schemes actually were up: DSP BlackRock Micro Cap Fund and HSBC Small Cap Fund. The first was up 3% and the second 2% while their benchmark, BSE Small Cap, fell 9%. Others among the top five outperformers were dividend yield plans-Escorts High Yield Equity Plan (1%), Tata Dividend Yield Fund (3%) and ING Dividend Yield Fund (3%) while their benchmark CNX100, Sensex and BSE200 fell 10%, 11% and 10% respectively.

Among the worst performers during this decline were Bharti AXA Equity Fund, Franklin India High Growth Companies Fund, Reliance Natural Resources Fund, Birla Sun Life Special Situations Fund and Religare AGILE Fund. Remember these names. They have stocks that are inherently more volatile.


Finally, insurer admits link to mis-selling

After repeated articles by Moneylife highlighting multi-level marketing and other illegal schemes being run by insurance agents, we have finally received information on some action taken by an insurer

Birla Sun Life Insurance has come out with an official statement on posters being plastered on local trains, advertising a dubious scheme being offered to potential agents to sell life insurance products
(see: http://www.moneylife.in/article/81/5641.html). According to the company’s statement, “appropriate action” is being taken against the concerned person.

We have reported on numerous occasions
(see: http://www.moneylife.in/article/78/5761.html) about such illegal schemes, including multi-level marketing (MLM), and this is the first time an insurer has responded. What’s more, officials from the company have admitted that the concerned person was associated with the company.

Selling insurance translates into big money for agents. A number of agents have been coming out with devious plans to sell policies to gullible investors. From operating MLM schemes, blatant mis-selling of unit-linked insurance products (ULIPs), plastering of fake job applications and sending misleading text messages—every trick in the book is being tried to peddle insurance products. The common factor in all of these dubious schemes has been the inaction of companies.  
In its statement to Moneylife today, Birla Sun Life Insurance said, “We thank you for bringing this matter to our notice. We have investigated the case and have taken necessary action against the concerned person.”

An official from Birla Sun Life Insurance, who did not want to be named, admitted that the person advertising the scheme was associated with the company. The official said, “He was associated with the company and his act was one of negligence and not knowing the rules prescribed by the company.”

However, it is not clear what kind of action was taken. An executive from the corporate communications department of the company said that disclosing the nature of the action “would be against company policy.”

This issue throws up three matters. First, these schemes are being run by employees from various companies or at least by individuals associated with various insurers. Second, more often than not, firms have hardly ever responded to such issues—Birla Sun Life is an exception—and if they do respond, the response is tepid (“We will be looking into the matter”). Third, both insurance companies and the Insurance Regulatory and Development Authority (IRDA) have still failed to take action against such persons.

On 11th May, Moneylife had sent a mail to IRDA about various MLM schemes in operation. We were told that such schemes were not allowed by the regulator and action would be taken against such companies.




7 years ago

Dear Sir
Check one More
How are they Able to advertise openly
Looks Like outright insurance MLM
PS: Check the Pictures with every level.They are selling dreams


7 years ago

the MLM companies and INSURERS are hand-in-glove in these schemes. The laws related to governing of agents are not fool proof. The Insurance company escapes on the ground that AGENT exceeded his limits & hence beyond the scope of Agent-Principal relation!

d k seth

7 years ago

well done, desered an applaued, eithic is very imp in an business, and the watchdogs are suppose to play the role. The conern person should be debared from his agency with immedate effect which shall deterent to others,


7 years ago

This only happens in Insurance domain , which is rather shocking and strange.Banking industry hardly face this kind of mis selling.Even NBFCs have improved.Enforcement in insurance sector can labelled as soft.Frauds are plenty and punishment is lax.

Laura Shapiro

7 years ago

Hi, I just wanted to point out that MLM, network marketing and multi-level marketing are all legitimate businesses that sell legitimate products and services.

The "schemes" you are describing in your article would be best described as pyramid schemes or Ponzi schemes. Network marketing is a legal business model, unfortunately often mistakenly confused with the illegal pyramid/Ponzi schemes or scams.

Govt approves 10% stake sale in Coal India, Hindustan Copper

The decision was taken at a meeting of the Cabinet Committee of Economic Affairs today

The government today approved disinvestment of 10% equity each in mining companies Coal India Ltd (CIL) and Hindustan Copper Ltd (HCL), reports PTI.

The decision was taken at a meeting of the Cabinet Committee of Economic Affairs (CCEA) earlier today.

"Disinvestment of Coal India Ltd would be through book building process in the domestic market. 1% of the equity will be offered to the employees of Coal India Ltd and its eight subsidiaries," home minister P Chidambaram told reporters after the CCEA meeting.

The committee also decided to allow 5% price concession to retail investors and employees of CIL. The paid up equity capital of CIL is Rs6,316.36 crore and the government owns 100% stake in the coal major.

For the disinvestment of Hindustan Copper Ltd, there will be a fresh issue of equity to extent of 10% of the pre-issued paid up capital.

"In conjunction with the issue of the equity, government will also disinvest its 10% pre-issued paid up capital of the company (Hindustan Copper)," Mr Chidambaram said.

The disinvestment in HCL, 0.41% stake of which is already with the public, will see the government holding coming down to 81.45% from 99.59% at present.

HCL's follow-on public offer (FPO) will see the firm issuing fresh shares aggregating up to 9.25 crore shares of face value of Rs5 each, with government selling a similar quantum of shares.

Shares of HCL jumped 11.15% to Rs523 on BSE during mid-day trade.

Copper mining firm HCL turned profitable last fiscal and is looking to expand its operations, for which it plans to fund its Rs4,200-crore augmentation programme.

HCL plans to raise copper ore production from 3.15 million tonne per annum (mtpa) to 12 mtpa and has plans to expand capacity of its mines and projects including the Khetri mines in Rajasthan, Malanjkhand Copper Project in Madhya Pradesh and Surda mines in Jharkhand.

The divestment and fresh equity issue is likely to fetch Rs4,000 crore, half of which will go to the government, mines minister B K Handique had said last week.


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