Most equity MFs struggle to exceed benchmark returns
Although broader markets have recovered from the impact of the first Kovid lockdown imposed in March 2020, many mutual fund schemes, including large-mid and small-cap, are lagging behind their respective benchmark indicators.
However, the total assets under management of the industry (AUM) rose 69 per cent to ₹ 37.57 trillion last month, up from 22.26 trillion in March 2020, due to a significant increase in inflows and market-to-market profit.
New fund offers
Mutual funds have raised ₹ 1.49 lakh crore in the last two financial years through new fund offers alone. Of the 27 large cap schemes of ICICI Pro MF (50.92 per cent), Nippon India MF (50.79 per cent) and Aditya Birla MF (50.15 per cent), only three were able to surpass their Nifty 50 (49.89%) benchmark returns. A small margin according to Fortune Investment Services data analysis.
The HDFC MF Large Cap Scheme Benchmark Index was close at 49.86 per cent, while the JM Large Cap Fund was at 28.97 per cent.
Similarly, out of 22 small cap schemes, four BSE small cap returns exceeded 235.47 per cent. Interestingly, smaller fund houses like Quant MF and Canara Rebecco topped the table with returns of 396 per cent and 258 per cent, respectively, while Nippon India and Kotak Small Cap delivered 254 per cent and 236 per cent, respectively. .
Meanwhile, nine of the 23 mid-cap schemes have S&P BSE mid-cap returns ranging from 161 per cent to between 235 per cent and 164 per cent.
Of the 25 flexi-cap funds that attract the most inflows, Quant MF, PGIM India and HDFC MF surpassed their benchmark returns of 87 per cent, 65 per cent and 58 per cent, respectively, against the Nifty 50 returns. 50 percent.
Large Cap Funds
According to S&P Dow Jones’ SPIVA India report, over a 10-year period, 68 per cent of large-cap funds have lowered their benchmarks by the end of December.
Last year, 50 per cent of Indian equity large-cap funds were S&P BSE 100 and 50 per cent were mid- / small-cap and 27 per cent were Indian ELSS funds, which outperformed their respective benchmarks, the report said.
Kaustubh Belapurkar, Director, Morningstar India, said that the markets have seen a polarizing rally driven by some stocks, with many active managers lagging behind their benchmarks and the alpha level generated by these funds is also declining.
Underperformance, he said, will allow investors to start adding passive funds to their portfolio as there are better low-cost options to take on equity exposure.
Abhinav Angirish, founder of Investinlineline.in, said markets had recovered nearly 100 per cent since the first lockdown on March 25, but mutual fund schemes had not been able to keep pace.
However, when it comes to returns, he said asset classes other than equities are not enough and investors should focus on building an optimal portfolio on equity schemes through SIPs.
April 15, 2022