August 5, 2019 (MLN): The world of investment is full of opportunities for the investors to park their money safely. There are some investments that carry high volatility and risk but generate high returns i.e. Equity Funds. In this regard, the performance of Equity Funds against KSE-100 index for the month of July is in order, so as to provide investors with the clearer picture of the funds.
Before diving into nitty gritty details regarding the progress of these funds, it is important to first evaluate the performance of the KSE-100 index so as to better understand the performance of these funds relative to their benchmark.
Over the last month, stock market performed rather poorly as is evident from the figure below which depicts a drop of 5.79% or 1,963 points in the index, as it followed a bearish trend throughout the month to close at 31,938 points level.
In the first two days of the month, the benchmark index ascended steadily, but unfortunately, the cheeriness on trading floors was short lived as the KSE-100 index descended sharply after that due to fear of rising interest rates which eventually increase by 100bps to 13.25% in July 16, 2019.
Throughout the month, investors’ sentiments remained negative primarily due to depressing economic indicators, hike in policy rate, double digit expectations for CPI inflation, fear of rising inflation on gas/ electricity price hike, FBR’s recovery drive for the collection of taxes and concerns over recent attempts to implement IMF proposed structural changes that hampered the market movements.
Subsequently, if we compare the progress of Equity funds with the miserable performance KSE-100 index, Faysal Stock Funds emerged as the best performing fund among those that invest in the equity market, going by data provided by Mettis Global Private Limited.
Although, the fund’s Net Asset Value (NAV) observed a decline of 3.04% compared to last month but the decline in returns was fewer than the drop in benchmark index (5.79%).
Faysal Stock Funds which holds high risk profile mostly played in Oil & Gas Exploration sector, as it held most of its investments in EPCL (8.84%), OGDCL (7.10%), LCPL (7.09%), POL and PPL (6.67%) as of June 2019.
From the figure below, it can be seen that all the funds recorded a decline in their respective NAV’s, while 15 funds’ returns posted smaller losses than the benchmark index.
After Faysal Stock Fund, the JS Value Fund realized a 4% decline in their NAV, while Alfalah GHP Alpha Fund and HBL Equity Fund both followed next in line with 4.4% drop in NAV.
These high risk, open ended equity funds also held the larger portion of their investments with Commercial Banks i.e. 17.2%, 26.7% and 24.75% respectively, while the rest went in the Oil & Gas Exploration Companies, Oil & Gas Marketing Companies, Fertilizers and Power Generation & Distribution Companies.
By analyzing the funds’ performances in the figure below, it is apparent that the Equities remained under pressure throughout in the month of July due to economic uncertainty and attractive yields on the fixed income owing to rise in interest rates.
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