Markets fall and recovery: Which equity funds out-performed in both phases

We take a look at 167 largecap, midcap and smallcap funds to find out which funds have beaten category average

Kumar Shankar Roy Jun 3, 2020

Stock marketsMarkets move in mysterious ways. Beginning the second week of February, when the coronavirus scare emerged, the fear dragged Indian stocks down in a downward spiral. After correcting for more than a month, a bottom was made unknown to all and stocks started recovering. How did equity funds perform? Of course, when markets corrected, funds mirrored the decline. When equities started regaining strength, fund NAVs showed improvement. There were a small collection of funds that managed the crisis well and also thrived more than others when recovery set in. In this article, RupeeIQ takes a look at the out-performers in largecap, midcap and smallcap categories, besides looking at respective category performance. Read on.

Largecap funds

Largecap mutual funds have a minimum investment of 80% in largecap stocks (the top 100 by market capitalisation). We looked at 114 largecap funds.

Bear market phase – We looked at how largecap funds performed between December 31 of 2019 to March 23 of 2020. The largecap category average in this phase was -35.1% loss, with as much as 42 funds beating the category average. The best fund in this phase was JM Large Cap Fund that capped losses to less than 15%. About 72 funds lagged the category average, with the worst scheme (Bharat 22 ETF) delivering nearly 40% loss.

Recovery phase – From March 24 onwards, markets started a quick recovery. Unknown to everybody else, a bottom was formed and that gave markets to find a support. Between March 24 and June 1, largecap funds as a category showed about 25% rise, with 69 funds of 114 funds beating the average. In this period, Quant Focused Fund was the best with nearly 34% gain while JM Large Cap Fund, which has managed the bear phase so well, became the under-performer with just 8.7% return.

Out-performers – There was a small set of largecap funds that did well both in the correction phase and in the recovery phase. Investors in these largecap funds will have lost less money than average when markets fell, while making more money than average when equities recovered.

These 19 largecap funds lost less than 35.1% in bear phase while gaining more than 24.81% in the recovery phase. These include 12 passively managed funds such as ICICI Prudential Nifty Low Vol 30 ETF, Nippon India Junior BeES FoF, Motilal Oswal Nifty Next 50 Index Fund, Aditya Birla Sun Life Nifty Next 50 ETF, IDBI Nifty Junior Index Fund, UTI Nifty Next 50 Exchange Traded Fund etc. The actively managed largecap funds in the out-performers segment are Motilal Oswal Focused 25 Fund, Quant Focused Fund, IDBI Focused 30 Equity Fund, Invesco India Largecap Fund, Franklin India Bluechip Fund and Sundaram Select Focus Fund.

Midcap funds

Midcap mutual funds have a minimum 65% money in midcap stocks (the 101st to 250th stock by market capitalization). We looked at 30 midcap funds.

Bear market phase – Between December 31 of 2019 to March 23 of 2020, 30 midcap funds fell an average 30.6%. Note how the drop is lower than largecap funds. About 16 schemes fell lower than midcap fund category average, with the best midcap fund Axis Midcap Fund arresting the drop to 24%. About 14 funds fell more than the category average, with the worst in this phase being ICICI Prudential Midcap Fund, which fell 36.35%.

Recovery phase – Between March 24 and June 1, midcaps funds staged a strong comeback of sorts. The category average was 21.25%, lower than largecap funds in this phase, possibly due to higher cash allocation. Anyway, as many as 18 midcaps funds bettered the category average, with the best being Quant Mid Cap Fund (up 31.7%). About 12 schemes under-performed the category average, with Motilal Oswal Midcap 30 Fund appearing the biggest laggard with just 12.6% rise.

Out-performers – Around nine midcap funds lost less money than average when markets fell, while making more money than average when equities recovered. Compared to largecap funds, these nine midcap fund out-performers were all actively managed. Active fund managers can quickly adjust a midcap tilted portfolio when sentiment changes from bearish to bullish. These funds include Quant Mid Cap Fund, PGIM India Midcap Opportunities Fund, UTI Mid Cap Fund, Taurus Discovery (Midcap) Fund, Principal Midcap Fund, Invesco India Mid Cap Fund, Tata Midcap Growth Fund & SBI Magnum Midcap Fund.

Point-to-Point Returns


Dec 31 to Mar 23 (bearish)

Mar 24 to Jun 1 9bullish)

For both periods

No. of funds Avg category loss % Better than average Avg category gain % Better than average Outperformers Laggards
Largecap 114 -35.1 42 of 114 (37%) 24.81 69 of 114 (61%) 19 (17%) 21 (18%)
Midcap 30 -30.61 16 of 30 (53%) 21.25 18 of 30 (60%) 9 (30%) 6 (20%)
Smallcap 23 -31.87 12 of 23 (52%) 20.72 11 of 23 (48%) 6 (26%) 6 (26%)
All regular plans      Only funds considered with NAVs available for the above two periods

Smallcap funds

Like midcap funds, smallcap funds have to invest a minimum 65% in smallcap stocks (from 251st onwards stocks in market cap chart). This gives them the freedom to add midcap and largecap stocks to balance the risk-reward of the portfolio. We looked at 23 smallcap funds.

Bear market phase – Between December 31 of 2019 to March 23 of 2020, smallcap funds as a category fell 31.87%. Notice how the average drop was less than largecap funds. As many as 12 of the 23 smallcap funds out-performed the average, with BOI AXA Small Cap Fund managing to arrest the decline at 21.68% as the best scheme. About 11 funds under-performed i.e. fell more than the average, with L&T Emerging Businesses Fund taking tha hardest knock of 38.6% fall.

Recovery phase – Both midcaps and smallcaps are yet to show the strong recovery that largecaps have shown so far. Smallcaps funds gained 20.72% as a category in the recovery phase that started from March 24 (and continues). About 11 of 23 smallcap funds gained more than the category, with Quant Small Cap Fund coming on top with over 26% rise. About 12 smallcap schemes under-performed vis a vis category average, with ICICI Prudential Smallcap Fund being the biggest laggards with 14.17% gain.

Out-performers – Only 6 smallcap funds i.e. 26% of smallcap schemes, lost less money than average when markets fell, while making more money than average when equities recovered. All these funds are actively managed. These are Quant Small Cap Fund, Canara Robeco Small Cap Fund, Principal Small Cap Fund, Edelweiss Small Cap Fund, BOI AXA Small Cap Fund and Tata Small Cap Fund.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at [email protected].

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