Equity Funds Review: You reap what you sow!

September 4, 2019 (MLN): Now that the month of August has come to an end, it would be worthwhile to shed some light on the performance of Equity Funds during the departed month. However, an in-depth review of equity mutual funds necessitates an understanding of the KSE-100 index, which also happens to be the benchmark of these funds.

Owing to a series of unfortunate events, the KSE-100 index observed a fall of 2,266 points during the month of August, and concluded 29,672 points, against the previous month’s closing of 31,938 points.

The first 8 sessions at the bourse remained under the heavy influence of uncertainty caused by rising inflation, an expectation of further depreciation in PKR, implementation of IMF proposed structural changes and most importantly, the escalating tension at line of control (LOC) after India revoked the special status granted to the Indian Occupied Kashmir.

Just when the investors were at their wits’ end, chairman Securities and Exchange Commission of Pakistan (SECP) Mr. Amir Khan’s visit to the Pakistan Stock Exchange (PSX) to analyze the horrendous performance of the equity market, burst through the dark clouds of pessimism like a ray of hope. In a matter of time, the index took a U-turn and spectacularly recovered around 3,100 points in only 4 sessions.   

Keeping in perspective this jeer worthy performance of benchmark index, it wouldn’t be hard to fathom that the performance of equity mutual funds was along the same lines, if not the same, or probably even worse.

Unfortunately yet unsurprisingly, all the equity mutual funds endured negative returns during the stated month. This automatically means that there were no winners in the scenario, but certainly there were some who endured least losses as compared to their peers.

Against a benchmark of -7.10%, which has been taken after carefully analyzing KSE-100 index’s performance for the said month, only 7 out of 31 companies emerged unscathed while the rest suffered tender losses. 

Going by the data maintained by Mettis Global, Faisal Stock Fund (FAYSALSAF) once again emerged as the least worst-performer of the month, as its Net Asset Value (NAV) fell from Rs. 41.76 per share in last month to Rs. 40.35 per share this month, signifying a negative return of just 3.38%. With a high risk profile, FAYSALSF holds most of its investments in the form of equities and cash.

AWT Stock Funds’ (AWTSF) performance was nearly similar to that of FAYSALSF, as its negative returns stood at 3.49%, following a slump in its NAV from Rs. 71.49 per share in last month to Rs. 69.39 per share this month. However, unlike FAYSALSF, its investments are mostly placed with banks and DFIs, followed by cash.

Next in line comes National Investment Unit Trust (NIT-NI(U)T), which gave negative returns of 5.59% over the month. The fund’s NAV lost Rs. 2.72 during the month as it was recorded at Rs. 45.95 per share on August 31, 2019 as compared to at Rs. 48.67 per share on July 30, 2019. In contrast to its predecessors, NIT placed majority of its investments in equities, as well as banks and DFIs.

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