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MUMBAI, Oct. 18

RETURNS on equity and balanced funds during September 2002 were in the negative territory on the back of poor performance in equity markets while diversified funds underperformed the Sensex, suffering the largest losses seen in September, says the Mutual Fund Equity Monthly survey from Merrill Lynch. According to the survey, the BSE Sensex lost close to six per cent in September with the equity funds following suit while diversified funds suffered the largest losses, underperforming the index. FMCG and pharma funds, though giving negative returns, fared relatively better. On the back of positive returns in the fixed income markets, MIP funds continued to give positive returns.

Diversified funds, the survey says, witnessed a seesaw return pattern since January this year but managed to outperform the index to give positive returns year-to-date, while the index has fallen close to eight per cent.

In terms of fund flows, equity and balanced funds witnessed negative flows in September. Diversified and sector funds saw close to Rs 63 crore in outflows while balanced funds saw outflows of Rs 37 crore. However, despite the negative developmentoutflows were marginal and spread across funds, the survey says. Despite their positive outlook on corporate profitability for oil stocks, fund managers have slashed exposure to the oil sector from 11 per cent to 7 per cent on the back of slowdown and uncertainty over the privatisation process.

The survey added that the optimism over the IT sector continued as there were reports that large orders would be made available to the Indian companies. As a result, fund managers increased exposure to the sector for the second month in a row. Weightage to FMCG and cement stocks continued to decrease in line with their negative outlook on the sector. According to the survey, while asset under management decreased last month on the back of marginal redemptions and drop in NAV, cash levels rose despite fund managers continuing to believe that markets were grossly undervalued.

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