India stock funds post best month since Jan

India's diversified stock funds posted their strongest gains in five months in June.

It reversed a bleak performance in May on improving global sentiment and domestic reform hopes, scoring big gains in the capital goods and financial sectors.

Fresh measures to ease the euro zone crisis, signs the government may revisit economic reforms and efforts to provide clarity on a tax proposal that had panicked foreign investors helped push the benchmark BSE index up 7.5 percent in June to a near two-month closing high.

Diversified equity funds, which form the largest category of mutual funds in India by number and assets, returned an average 6.01 percent in June, data from fund tracker Lipper, a Thomson Reuters company, showed. In May, these funds fell 5.65 percent.

"The worst appears to be over and probably July will be a month of consolidation," said R K Gupta, managing director at Taurus Mutual Fund, adding that the outlook has improved from previous months.