Indian equity funds investing in technology stocks topped the returns chart in December on the back of robust growth in mid-cap stocks, but banking funds suffered losses, data from fund tracking firm Lipper showed.

Information technology funds gave returns in the range of 4.71-11.35% over the month, beating the 3.24% gain of sector benchmark BSE IT index, data from Lipper, a Reuters company showed.

"In the last one month, mid-cap tech stocks have outperformed the large-cap tech stocks," Anup Maheshwari, head of equities, DSP Merrill Lynch Fund Managers Ltd, said.

Technology funds with good exposure to mid-cap and small-cap stocks gained from the outperformance. Exposure to telecom and media sectors also helped his technology fund do well.

Such funds gained on an average 46.46% in 2006, bettering the BSE IT index which rose 40.87% during the same period.

Funds investing in financial services stocks posted negative returns after India's central bank raised the cash reserve ratio (CRR), triggering a fall in prices of banking stocks in December.

Funds in the category fell by 1.98% on an average, as compared to a 1.31% drop in sector benchmark BSE Bankex.

The index fell by over 9% to 6531.95 points on Dec. 12, 2006, after the central bank cut the CRR by 50 basis points to 5.50% in a surprise move late on December 8.

Equity India, the largest category both in terms of assets under management and number of funds investing across sectors and market capitalisation, gained 1.28% to race past the 0.82% return of BSE 500 index in December.

However, of the 225 funds in the category, 103 schemes underperformed the broader BSE 500 index with 39 funds posting negative returns. Mid-cap and small-cap stocks playing catch up with large-cap stocks helped the outperformers, fund watchers said.

The BSE Mid-cap and BSE Small-cap indices gained 1.46 and 3.69%, respectively, in December as compared to a 0.66% rise in the large-cap index BSE 30-share index.

Funds investing in the drug sector gave an average return of 2.9%, handsomely outpacing the 1.92% gain of sector benchmark BSE Healthcare index.

Fund categories investing in both stocks and bonds gained between 1.23% and 0.37% on an average.