The best fund in that period fell 14% while the worst was down by 50%
From mid-January right up to the third week of March 2020, stock markets and equity mutual funds faced a terrible time. Expensive valuations and the emerging threat of Coronavirus disease outbreak knocked the wind out of sails, as the markets crashed about 40% from the peak of 12,000 to touch a low of 7,500. The best fund in that period fell 14% while the worst was down by 50%. In this period, when bears ran amok, the average loss to investors of a domestic-oriented equity fund was 36%.
But, markets then saw a sharp pullback rally. It was a phoenix-like rise, mutual fund investors hadn’t seen in quite a while. If the fall was a savage bloodbath, the rise was a bacchanalian party fuelled by ultra-cheap liquidity. Quite a few funds rose 50-60%, surprising even the most bullish investors. Which funds were the best performers in the ongoing pullback rally? In this article, we will look at the performance and much more.
Before we go into the pullback rally, we should talk about the fall. On January 17, the Sensex was blissfully unaware of the upcoming tsunami as it was perched at 41,945 points. By March 23, it fell below 26,000 mark (25,981). In a little over 60 days, 38% of market value was eroded in a ferocity not seen for a long time.
Naturally, equity mutual funds — being market-linked products — bore the brunt of a cruel change of sentiment. Chaos reigned supreme. Banking funds were the worst hit with ICICI Prudential Private Banks ETF (down 49.28%), Tata Nifty Private Bank Exchange Traded Fund (-49.07%), and Nippon India Banking Fund (-48.29%) the worst hit.
Investors in select thematic/sectoral funds and value funds including HDFC Infrastructure Fund (-46.51%), UTI Transportation and Logistics Fund (-43.76%), and IDFC Sterling Value Fund (-43.04%) also suffered quite a bit.
Smallcap funds also were in the worst performers list, with L&T Emerging Businesses Fund (-42.29%), Motilal Oswal Nifty Smallcap 250 Index Fund (-41.72%) and Aditya Birla Sun Life Small Cap Fund (-40.97%) fell sharply.
On the other side of the spectrum, it was pharma & healthcare funds that shielded investors from the harsh realities. They are also the best performers in the tumultuous times. Tata India Pharma & HealthCare Fund fell only 13.66%, Mirae Asset Healthcare Fund declined only 15.76% and IDBI Healthcare Fund dipped only 15.78%, lower than even the Sensex. A few outliers from other fund categories did appear in the performers’ list like JM Large Cap Fund down only 15.29%.
Then, the pullback has been stunning so far. Sidestepping the coronavirus-related worries, markets seemed to have constructed their own road to recovery. Abundant liquidity, cheap valuations and fully pricing in FY21 as a poor earnings year, stock markets look beyond.
If funds focussed on pharma & healthcare, one of the traditionally defensive themes, saved the day for investors in the downturn, the recovery saw funds anchored to IT/technology, Consumption and Concentrated portfolios coming on top.
Here are the top performers
|Fund Name||% gain in pullback||% loss in mkt crash|
|ICICI Prudential Technology Fund||60.58||-33.36|
|Quant Small Cap Fund||58.86||-34.53|
|Quant Consumption Fund||56.79||-34.28|
|PGIM India Diversified Equity Fund||56.57||-36.13|
|Franklin India Technology Fund||55.94||-27.92|
|Quant Active Fund||55.26||-34.58|
|Quant Tax Plan||55.24||-35.12|
|ICICI Prudential Commodities Fund||54.26||-40.41|
|ICICI Prudential P.H.D Fund||53.73||-18.15|
|Aditya Birla Sun Life Digital India Fund||53.24||-32.01|
*All regular plans
The gains have been out-sized for the best schemes. ICICI Prudential Technology Fund, which lost 33% in the dip, rebounded with a 60.58% gain. Quant Small Cap Fund, which shed 34.53% in the fall, jumped back with 58.86% return. Quant Consumption Fund gained 56.79%, PGIM India Diversified Equity Fund advanced 56.57% and Franklin India Technology Fund went up by 55.94%
On a larger review, the best performers in the pullback rally were positioned to benefit from technology, pharma, themes, value picks, infrastructure, etc. Unfortunately, the mojo doesn’t seem to be back in banking, PSU, select largecaps oriented portfolios. The Sensex rose 45% from March 23 to July 21. The not-so-good performers’ list in the pullback rally period includes Nippon India ETF PSU Bank BeES up only 14.92%, Kotak PSU Bank ETF up only 14.95%, SBI Consumption Opportunities Fund up only 18.36% and CPSE Exchange Traded Fund up 21.26%. Notice how some funds like JM Large Cap Fund, which shielded investors in the downturn, figure in this list with 19.19% gain, underperforming the broader market.
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