Equity funds headed by FMCG, Pharma under the thematic funds performed impressively in the month of June 2011 clocking 5.3 pct and 1.06 % as against the benchmark return of 4.8 pc and 0.08 pc for the same period, thus outperforming the benchmark. Funds guided by banking stocks delivered 1.7 pc for the June period as against its benchmark return of 2.2 %.

Diversified equity funds on an average gained 0.8 pc but underperformed benchmark return of 0.85 (BSE-100). The average returns under the flexi style investing rose 0.9 pc and under value style investing gain 0.56 pc. ELSS scheme registered 1.16 pc average returns for the investors.

Debt funds too managed to build value for investors as bond markets saw the yields softening for both the short-term as well as the long-term debt papers, according to data from ACE MF, PersonalFN Research, showed.

"FMCG and Pharma which is primarily the consumption story in India is quite strong and so far unaffected by sticky inflation" says Rounaq Neroy, Senior Research Analyst at PersonalFN.com . "It has encouraged fund managers to go long on the sector and has reaped the right fruits for the FMCG funds while Pharma is a defensive sector and thus will always continue to provide modest returns in the long-term", adds Neroy.

The infrastructure funds did not perform as well as investors would want it to, on back of rising interest rate cost, delay in project completion and working capital problems faced by most developers which kept away many investors away from the sector. The sector managed to deliver 0.1325 pc average return but was still able to outperform its benchmark which registered negative return of over 7 pc for the same period.

"Given the bottlenecks in the sector the returns on infra theme mutual funds are also not very encouraging, given its scope and size", adds Neroy.

As far the banking sector goes, the banking stocks have reflected reasonable valuations after the RBI has raised policy rates successively since March 2010. The BSE Banking Index clocked over 2 pc return in the month of June with HDFC Bank and State Bank of India gaining nearly 5 pc for the month.

Investment in Equity Markets

The Assets under management (AUM) of mutual fund industry has shown a jump of 6.1% from the last quarter (January 2011 to March 2011). The AUM for the quarter April 2011 to June 2011 is about Rs 743,084 crore.

According to data, domestic mutual funds bought aggressively to the tune of Rs1,198 crore, thereby accelerating further from their last month's (May 2011) net buying activity of Rs 353 crore.

Foreign Institutional Investors (FIIs) were also not far away from the action as they pitched in close to Rs 4,572 crores for the month of June as against the net selling witnessed of Rs 6,614 crore, for the month of May.

Demand for yellow metal - gold, dwindled for the month of June 2011, down 2.6 pc. The yellow metal lost its audience as crisis in Europe has started to look better after Greece govt approved the austerity packages while better economic numbers from USA also aided the fall.

But things are not as gloomy as it looks for the yellow metal. "Gold Saving Funds are attractive option for many investors which is evident from the rising AUMs of these funds", adds Neroy. Investors are getting enthused by the SIP mode offered by Gold Saving Funds.

In the Indian debt markets domestic mutual funds bought aggressively to the tune of Rs 34,991crore in the month of June as against the net selling witnessed of Rs 1,189 crore, for the month of May.

Market Review:

The BSE Sensex witnessed some heavy selling in the first half of the month but managed to close 1.9 pc higher for the month of June. Surging inflation, rising interest rates, debt-overhang situation in Europe and QE II coming to end all contributed to the volatility in the Indian market.

The 50-share Nifty Index closed 1.6 pc higher for the month of June while in the broader market, BSE Small-cap index and BSE Mid-Cap index slipped 1 pct and 1.2 pc respectively.

"Fund managers in most equity funds are wary about the uncertainty of the equity markets at present, and thus are taking prudent cash calls in the range of 10% - 15%; but it is varying as per the mandate followed by the respective funds", adds Neroy.

Industry players are expecting an upturn in the coming days pursuant to the government allowed foreign investors, other than FIIs, to invest up to USD 10 billion in domestic mutual funds.

"This move will allow a new class of investors, known as Qualified Foreign Investors (QFIs) to participate in the mutual fund industry", says Nozer Damania, Research Analyst at PersonalFN.com.

New Schemes:

Country's sixth largest asset manager SBI Mutual Fund's new fund offer (NFO) promising regular income on a minimum investment of Rs 5,000 opens today, 4th, July 2011 and will close on 7th July, 2011.

The SBI Debt Fund Series-90 Days-46, would invest in portfolio comprising debt instruments like government securities, PSU and corporate bonds and money market instruments

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