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Dec 26, 2008

2008 Investments A Review

If 2008 was a bad year for stocks, it was brutal for funds that rode high on the bull run posting big gains last year. Equity mutual funds (MFs) that logged in returns between 70% and 110% in 2007 and emerged on top have put up a dismal show during the current market meltdown. Top MFs in 2007 have significantly underperformed the benchmark indices posting some of the biggest losses this year, data with Value Research, a firm that tracks MFs shows.


In all, 14 funds that were in the top 40 list last year have ended up at the bottom of the ladder, the analysis shows. JM Basic, Canara Robeco Infrastructure, State Bank of India Magnum COMMA and Midcap are some of the funds that have registered huge declines after growing more than 70% last year. Most of these funds invested mainly in engineering, construction, commodities, small and mid-cap stocks — all of which did well during last year's bull run. But with commodities prices falling sharply and real estate impacted by the demand slowdown, stocks in these sectors have taken a heavy beating.



In fact, engineering (32.76%) , construction (18.22%), steel (27.01%) and refineries (9.8%) are among the sectors that have shown the steepest fall in value terms for MFs in November. While large-cap stocks have offered some stability mid and small-cap heavy portfolios have been badly hit in a falling market. Several fund houses have started paring their exposure to mid-cap stocks and have gone in for large cap ones. Interestingly, funds that did badly during the last year have come up with a good performance in 2008. Many of these funds had exposure in communication, FMCG, healthcare and diversified segments. MFs, which have remained conservative putting money in debt and short term instruments, too fared well. The sensex posted a 47.1% growth in 2007 and slipped 52.25% (up to December 23).

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