More than half of equity MF schemes fail to beat benchmark

Justifying the increasing pitch for passive fund investment, more than half of equity large-cap funds have failed to beat the benchmark.

As per the S&P Indices Versus Active Funds (SPIVA) India scorecard report for last year, 52 per cent of actively managed funds have underperformed the benchmark S&P BSE 100.

• Also read: Markets end FY24 on buoyant note amid positive global cues

Further, 74 per cent of actively managed mid and small cap funds have underperformed their benchmark of BSE 400 MidSmall Cap Index which was up 44 per cent last year.

Over the 10 year period, 75 per cent of these funds lagged behind the benchmark S&P BSE 400 MidSmall Cap index.

Benedek Voros, Director, Index Investment Strategy, S&P Dow Jones Indices said the market’s vigour is unmistakable with the S&P BSE 100 and S&P BSE 200 indices posting gains of 23 per cent and 24 per cent last year.

This performance underlines a pivotal year for Indian markets, sustained by a macroeconomic environment that has seen interest rates and commodity prices stabilising, added Voros.

In a small relief for investors, just 30 per cent of ELSS (equity linked savings schemes) funds underperformed their benchmark, the S&P BSE 200 and is the only category where the majority of funds outperformed the relevant benchmark last year, said the report.

The S&P BSE India Government Bond Index increased by 8 per cent last year and less than a fifth of active managers beat the benchmark in this category, bringing the underperformance rate to 82 per cent.

Similarly, the S&P BSE India Bond index rose 8 per cent, while the underperformance of Indian Composite Bond fund managers at 96 per cent was the highest across all categories in the SPIVA India Scorecard.

An interesting aspect that came to light was how over a 10-year period just 1 of 116 Indian Composite Bond funds outperformed the index, corresponding to an underperformance rate of 99 per cent, the highest underperformance rate across all categories over any time horizon.

The SPIVA Year-end 2023 finds India among the leaders of the global stock market rally with all observed equity benchmarks posting gains of over 20 per cent for the year. Indian bond markets also had a strong year, with annual returns at 8 per cent, it said.

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