*Bank funds gain an average 15.8 pct vs 9.3 pct in BSE index *Diversified funds lag on lower gains from cap goods, FMCG
*Debt funds jump 0.75 pct as federal bond yields drop 25 bps
Indian funds investing in bank stocks recorded the sharpest jump in net values in September as shares of financial firms rose on prospects of better corporate results and hopes the credit growth would start ticking up.
Banking sector mutual funds gained an average 15.8 percent during the month, outperforming the 9.3 percent rise in India's benchmark 30-share index .BSESN, data from global fund tracker Lipper, a Thomson Reuters company, showed.
"If you are betting that the Indian economy will do well despite the global meltdown... this is the sector which will obviously outperform," J. Venkatesan, a fund manager at Sundaram BNP Paribas Asset Management, said.
"Valuation comfort is much more better here than any other sector," Venkatesan added.
He said most state-run banks were available at a reasonable 1.5 times their price to book value, while returns on equity were about 18 percent and improving.
Indian firms will start releasing their quarterly results from the second week of October, and advance tax payments indicate robust profits.
That should ease pressure on likely bad loans for banking firms and also boost prospects for credit off-take as corporates return to health and revive expansion plans.
Top lender State Bank of India climbed little over a quarter in September to 2,195.70, its highest close since February last year, as investors expected strong corporate earnings to boost the bank's profits and ease bad debt worries.
No. 2 lender ICICI Bank rose 21 percent to 904.80 rupees during the month, its highest close since May 21, 2008.
Actively managed diversified equity funds, the biggest category of stock funds by number and assets, recorded a 7.2 percent return, underperforming the main share index.
More tha 90 percent of them underperformed the benchmark index on lower returns from their large exposure in sectors such as capital goods, consumers and energy as well as exposure to small and mid-cap stocks.
The three sectors collectively controlled about a third of the equity investments of diversified funds at the end of August, data from fund tracker ICRA Online showed.
Banking sector mutual funds gained an average 15.8 percent during the month, outperforming the 9.3 percent rise in India's benchmark 30-share index .BSESN, data from global fund tracker Lipper, a Thomson Reuters company, showed.
"If you are betting that the Indian economy will do well despite the global meltdown... this is the sector which will obviously outperform," J. Venkatesan, a fund manager at Sundaram BNP Paribas Asset Management, said.
"Valuation comfort is much more better here than any other sector," Venkatesan added.
He said most state-run banks were available at a reasonable 1.5 times their price to book value, while returns on equity were about 18 percent and improving.
Indian firms will start releasing their quarterly results from the second week of October, and advance tax payments indicate robust profits.
That should ease pressure on likely bad loans for banking firms and also boost prospects for credit off-take as corporates return to health and revive expansion plans.
Top lender State Bank of India climbed little over a quarter in September to 2,195.70, its highest close since February last year, as investors expected strong corporate earnings to boost the bank's profits and ease bad debt worries.
No. 2 lender ICICI Bank rose 21 percent to 904.80 rupees during the month, its highest close since May 21, 2008.
Actively managed diversified equity funds, the biggest category of stock funds by number and assets, recorded a 7.2 percent return, underperforming the main share index.
More tha 90 percent of them underperformed the benchmark index on lower returns from their large exposure in sectors such as capital goods, consumers and energy as well as exposure to small and mid-cap stocks.
The three sectors collectively controlled about a third of the equity investments of diversified funds at the end of August, data from fund tracker ICRA Online showed.
BOND, GOLD FUNDS
Indian fixed income funds investing in government securities recorded a 0.75 percent jump in net values in September as federal bond yields IN069019G=CC dropped 25 basis points. The prospect of an increase in the hold-to-maturity (HTM) limit for banks had supported prices in September on a view it would enable banks to buy more bonds and help the market better absorb the government's record borrowing programme in 2009/10.
The government plans to sell 1.23 trillion rupees of bonds in the second half of the fiscal year after raising 2.95 trillion rupees in the first half.
Gold exchange traded funds gained 3.4 percent during the month as the yellow metal rose primarily due to a weak dollar overseas, which spurred buying in the alternative investment.
Gold futures on the continuation chart MAUc1 ended September at 15,703 rupees per 10 grams, up 3.8 percent during the month.
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