Over the last 6 months, equity funds have been on a roll so to speak. Some leading equity funds have outperformed the leading indices (Sensex, Nifty) by a reasonably good margin. More importantly, they have exceeded the expectations of investors, which is in many ways is more difficult than outperforming the index.

A lot of investors have been very disappointed with equity funds over the years and the product hasn't really taken off as many fund houses would have liked. That is one reason why some leading international names that entered the country with much fanfare are now considering packing their bags (while some others have already done that). Over the last 3-4 years equity funds have posted a disappointing performance and except for some brief flashes of out-performance during the tech boom in 1999-2000, when just about anyone did better than the index, net asset values (NAVs) of equity funds have languished most of the time.

GROWTH FUNDS	NAV (Rs)	NAV DATE	1-WK	1-MTH	6-MTH	1-YR	INCEP.
PIONEER I PR FUND G	27.0	19-Apr	-3.3%	2.9%	67.1%	47.2%	12.6%
RELIANCE VISION	20.9	19-Apr	0.3%	9.7%	55.7%	48.0%	11.6%
GIC FORTUNE 94	6.7	19-Apr	-4.9%	1.5%	53.0%	30.4%	-4.7%
ING GROWTH G	7.8	19-Apr	-4.3%	-3.2%	45.0%	15.3%	-7.4%
BOINANZA EXCL G	9.8	19-Apr	0.8%	7.0%	41.1%	46.4%	2.2%
PIONEER I PR PLUS G	23.7	19-Apr	-2.8%	-2.2%	37.3%	22.3%	13.6%
ZURICH I EQUITY G	22.0	19-Apr	-3.9%	-0.9%	36.5%	29.5%	12.3%
ALLIANCE EQUITY G	27.3	19-Apr	-2.2%	0.8%	34.3%	10.8%	30.6%
DSP ML OPP G	8.0	19-Apr	-4.3%	-1.1%	33.1%	11.0%	-4.9%
FRANKLIN GROWTH	5.7	19-Apr	-2.6%	-0.2%	32.6%	12.3%	-24.4%

(Returns over 1-Yr are annualised compounded. Returns are adjusted for dividends)

However, domestic equity funds have got a little push from an unexpected quarter  the September 11 (9/11) terrorist attacks in the USA that saw the BSE Sensex slump to 2,600 levels. The rebound in equities over the last 6 months has been sharp and funds have seen significant appreciation in their performances.

This could provide just the fillip that this product needs. Investors have taken note of the improved performance and AMFI (Association of Mutual Funds in India) figures show encouraging inflows in the equity fund category over the last few months. With this sterling performance equity funds have finally done something that has proved elusive  managing investor expectations. After the tech crash in 2000, equity funds have received one of the worst tongue-lashings from distressed investors so much so that a revival in investor interest seemed a distant possibility. But the last few months have witnessed equity funds meeting investor expectations if not exceeding them.

This revival in fortunes will hopefully be the harbinger of better things in the future as far as equity funds are concerned. The improved inflows in equity funds in any case seem to imply just that. On a more cautious note, investors must continue to be realistic and not expect the fund manager to deliver this performance quarter on quarter. Equity funds continue to be long term investments and investors need to look at them with that perspective.

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