RupeeIQ conducted a study on 104 actively managed Largecap, Midcap, Smallcap and Multicap funds to check the 1, 3, and 5-year performance vis-a-vis respective benchmark indices
Checking your investment portfolio after a market crash is normal. Everybody does that. After the sharp correction in stocks, your portfolio would be in the red. That is also normal. Should you worry your mutual fund investments are in loss? No. Your focus should be on how your actively managed equity mutual fund has performed against its the benchmark index. On that yardstick, equity mutual funds show a mixed record in navigating coronavirus pandemic triggered market crash. RupeeIQ conducted a study on 104 actively managed Largecap, Midcap, Smallcap and Multicap funds to check the 1-year, 3-year, and 5-year performance vis-a-vis respective benchmarks. Read on to know more how funds managed downside risks.
Mutual fund industry body AMFI provides mutual fund performance data. We looked at five main categories of actively managed equity funds i.e. Largecap, Midcap, Smallcap and Multicap. We took the NAV data for regular MF plans (sold by MF distributors) for March 19, 2020 and looked at 1 year, 3 year, and 5 year returns. We ignored the relatively new category called Large & Midcap funds.
Though these are point to point returns, they can give a broad idea of how equity mutual funds are performing over different time periods. Also, we compared the fund returns with their stated benchmark index over different time periods to see whether individual funds are still performing better or worse. The benchmark index returns are for Total Return variant, which means effects of dividends enjoyed by the constituents have been captured.
Below is a table that captures the category performances.
|Fund category||1 Year Period||3 Year Period||5 Year Period||Noteworthy performance|
|Funds beating benchmark (%)||Funds beating benchmark (%)||Funds beating benchmark (%)|
|Largecap||24/29 (83%)||18/27 (33%)||7/27 (26%)||Axis Bluechip, Canara Rob. Bluechip|
|Midcap||21/23 (91%)||18/22 (82%)||11/21 (52%)||DSP Midcap, Axis Midcap|
|Smallcap||17/20 (85%)||12/14 (86%)||12/14 (86%)||Axis Small Cap, SBI Small Cap|
|Multicap||25 of 32 (78%)||15 of 27 (56%)||14 of 27 (52%)||Parag Parikh Long Term Equity, JM Multicap|
|# For regular plans As on March 19, 2020 Data source: AMFI Analysis: RupeeIQ|
We analysed 29 largecap funds with current combined assets of Rs 1.12 lakh crore. Funds use either of the four largecap indices viz. NIFTY 50 TRI, S&P BSE 100 TRI, S&P BSE Sensex TRI, NIFTY 100 TRI as benchmark.
In the one-year period, 24 of the 29 largecap funds out-performed their respective benchmark indices. The best performer was Axis Bluechip with just 10.15% fall compared to Nifty 50 TRI’s 27.43% decline in 1 year period. There were five funds that didn’t beat their benchmark indices and these are Aditya Birla Sun Life Frontline Equity, DSP Top 100 Equity, Franklin India Bluechip, HDFC Top 100 and Nippon India Large Cap. HDFC Top 100 was the worst with an under-performance of over 5 percentage points
In the 3-year period, 18 of the 27 largecap funds outshined their benchmarks. The best performer was again Axis Bluechip Fund with nearly 7% CAGR compared to over 2% decline in Nifty 50 TRI. There were nine funds that didn’t beat their benchmark indices. The worst performers, in terms of alpha, are Tata Large Cap, Taurus Largecap Equity Fund, Essel Large Cap Equity, Franklin India Bluechip and HDFC Top 100 and Aditya Birla Sun Life Frontline Equity (each with over 3% points under-performance).
In the 5-year period, the number of funds performing better than their benchmark falls drastically to just 7 or 26% of 27 funds. The best performer again was Axis Bluechip with 4.57% point alpha. The number of under-performers is quite long with 20 funds. The worst performers, in terms of alpha, are Tata Large Cap Fund, Taurus Largecap Equity Fund, Baroda Large Cap and Franklin India Bluechip (each with at least 2% points under-performance).
We analysed 23 midcap funds with current combined assets of nearly Rs 66,000 crore. Funds use either of the three midcap indices viz. NIFTY Midcap 100 TRI, S&P BSE Mid Cap TRI, and NIFTY Midcap 150 TRI as benchmark.
In the 1-year period, 21 of the 23 midcap funds outshined their benchmarks. The three best performers are Axis Midcap, DSP Midcap and Invesco India Mid Cap, each with over 10% point out-performance. Two funds viz. ICICI Prudential Midcap and Quant Mid Cap Fund failed to beat their benchmarks, but the extent of under-performance is not stark.
In the 3-year period, 18 of the 22 midcap funds generated alpha. The three best performers are Axis Midcap (13.57% CAGR alpha), Invesco India Mid Cap (9.33% CAGR alpha) and Taurus Discovery (8.13% CAGR alpha). The worst ones are SBI Magnum Midcap (-3.38% CAGR alpha) and ICICI Prudential Midcap (-2.31% CAGR alpha).
In the 5-year period, as many as 10 of 21 funds failed to beat the benchmark. The three worst funds, in terms of alpha, are Baroda Midcap (-4.98% CAGR), Quant Mid Cap (-3.84% CAGR) and ICICI Prudential Midcap (-3.24%). In this backdrop, the 3 best performers are DSP Midcap (4.96% CAGR alpha), Kotak Emerging Equity (4.22% CAGR alpha) and Axis Midcap (3.87% CAGR alpha). In total, 11 midcap funds beat their benchmarks.
We analysed 20 smallcap funds with current combined assets of nearly Rs 37,000 crore. Funds use either of the 4 smallcap indices viz. NIFTY Smallcap 100 TRI, NIFTY Smallcap 250 TRI, S&P BSE Small Cap TRI, and S&P BSE 250 SmallCap TRI as benchmark.
In the 1-year period, 17 of the 20 smallcap funds outperformed their respective benchmarks. The three best performers are Axis Small Cap (35.43% alpha), BOI AXA Small Cap (26.6% alpha) and Tata Small Cap (19.67% alpha). Out of the three smallcap funds that didn’t beat their benchmark, Quant Small Cap’s 40.27% loss was 3.44% point more than NIFTY Smallcap 250 TRI’s 36.82% decline.
In the 3-year period, 12 of the 14 smallcap funds beat their benchmarks. The three best performers are Axis Small Cap (20.07% CAGR alpha), SBI Small Cap (11.94% CAGR alpha) and HDFC Small Cap (10.77% CAGR alpha). Just two funds viz. Sundaram Small Cap and Quant Small Cap failed to beat their respective benchmarks, but the under-performance is below 3% points.
In the 5-year period, the story is similar to the 3-year period. 12 of 14 smallcap funds managed to beat respective benchmarks, with 3 best performers being Axis Small Cap, SBI Small Cap and Kotak Small Cap. The two funds that are under-performing their respective benchmarks are Sundaram Small Cap and Quant Small Cap.
We also analysed 32 multicap funds with current combined assets of Rs 1.13 lakh crore. Multicap funds use either of the four indices viz. S&P BSE AllCap TRI, NIFTY 500 TRI, S&P BSE 500 TRI, and NIFTY 200 TRI as benchmark.
In the 1-year period, 25 of the 32 multicap funds beat their benchmarks. The best performers are Axis Multicap Fund (17.52% alpha), JM Multicap (12.92% alpha), DSP Equity (12.70% alpha) and Parag Parikh Long Term Equity (12.41%). Out of the 7 under-performing smallcap funds, HDFC Equity (-5.56% alpha) and Nippon India Multi Cap (-4.88% alpha) are worst-hit.
In the 3-year period, 15 of the 27 multicap funds beat their benchmarks. Out of them, Parag Parikh Long Term Equity, Canara Robeco Equity Diversified and UTI Equity are the best in terms of alpha delivery. Out of the 12 under-performers, Taurus Starshare, HSBC Multi Cap Equity and Franklin India Equity emerged the worst in the 3-year period with under-performance extent of 3-4% CAGR each.
In the 5-year period, about 52% or 14 of the 27 multicap funds managed to beat their respective benchmarks. The best performers include Parag Parikh Long Term Equity, JM Multicap and SBI Magnum MultiCap. The 13 multicap funds that have under-performed benchmarks in the 5-year period have cases of marginal under-performance to maximum under-performance of 4.4% CAGR. Out of them the worst-hit are Taurus Starshare, LIC MF Multicap and Union Multi Cap.
If stock markets continue to remain weak, funds with weaker performance can slide further down. Do note that out-performance in funds, besides better stock selection and portfolio construction, can also be due to higher cash allocations, which act as a cushion against overall market decline. Investors must also remember that during downturns, some funds with concentrated portfolio approach will be hit harder. This situation can reverse if the recovery happens. Instead of investing all your money in one category of funds, it is better to diversify by placing money across different types of equity funds so that your downside is protected while upside potential is not harmed. Retail investors must not venture into thematic categories like sector or international funds.
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