Most equity MFs struggle to beat benchmark returns

Suresh P. Iyengar | | Updated on: Apr 16, 2022
Over a 10-year period, 68 per cent of large-cap funds have underperformed their benchmark in period ended last December

Over a 10-year period, 68 per cent of large-cap funds have underperformed their benchmark in period ended last December | Photo Credit: designer491

Even as markets recover from the impact of first-ever lockdown imposed in March, 2020

Most of the mutual fund schemes, including large- mid- and small-cap, are still lagging behind their respective benchmark indices even as the broader markets have more than recovered from the impact of the first Covid lockdown imposed in March, 2020.

However, the overall asset under management (AUM) of the industry increased 69 per cent last month to ₹37.57 lakh crore against ₹22.26 lakh crore logged in March 2020 largely due to sharp increase in inflows and mark-to-market gain.

New fund offers

Mutual funds have mopped a whopping ₹1.49 lakh crore through new fund offers alone in last two fiscals. Only three of the 27 large-cap schemes of ICICI Pru MF (50.92 per cent), Nippon India MF (50.79 %) and Aditya Birla MF (50.15 per cent) have managed to beat their Nifty50 (49.89%) benchmark return, albeit by a small margin, according to a data analysis by Fortune Investment Services.

HDFC MF large cap scheme had the closest to benchmark index return of 49.86 per cent while the least was that of JM Large cap fund at 28.97 per cent.

Similarly, four of the 22 small cap schemes have beaten BSE Small Cap return of 235.47 per cent. Interestingly, smaller fund houses such as Quant MF and Canara Rebeco topped the table with returns of 396 per cent and 258 per cent, respectively, while Nippon India and Kotak Small cap followed by delivering 254 per cent and 236 per cent in the last two years.

Meanwhile, nine of the 23 mid-cap schemes had returns ranging between 235 per cent and 164 per cent against the S&P BSE mid-cap returns of 161 per cent.

Among 25 flexi-cap funds, which attracts the maximum inflows, nine have beaten their benchmark with Quant MF, PGIM India and HDFC MF leading the table with returns of 87 per cent, 65 per cent and 58 per cent respectively against the Nifty 50’s return of 50 per cent.

Large-cap funds

Over a 10-year period, 68 per cent of large-cap funds have underperformed their benchmark in period ended last December, according to S&P Dow Jones’SPIVA India report.

Last year, the report said 50 per cent of Indian equity large-cap funds underperformed the S&P BSE 100 and 50 per cent of Mid-/Small-Cap and 27 per cent of Indian ELSS funds underperformed their respective benchmarks.

Kaustubh Belapurkar, Director, Morningstar India, said markets have seen a polarised rally driven by few stocks resulting in most active managers trailing their benchmarks and the level of alpha being generated by these funds are also shrinking.

The under performance, if it persists, investors will start looking to add passive funds in their portfolio as there are good low cost options to take equity exposure, he said.

Abhinav Angirish, Founder, Investonline.in said the markets have recovered nearly 100 per cent since the first lockdown on March 25, but the mutual fund schemes were unable to keep up the pace.

However, he said when it comes to returns no other asset classes can match that of equities and investors should focus on building optimum portfolio in equity schemes through SIPs.

Published on April 15, 2022
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