86% of Indian large-cap funds underperformed their benchmarks: Report

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As much as 86.2% of Indian equity large-cap funds, 57.1% of mid-/small-cap and 53.7% of the equity-linked savings scheme or ELSS funds underperformed their respective benchmarks for the one-year period ending June 2021.

These are the finding of the latest S&P Indices Versus Active (SPIVA) India scorecard report, which is compiled every six months by index provider S&P Dow Jones Indices.

The report also showed that over longer horizons, the majority of the actively managed funds in India underperformed their respective benchmarks.

Over a five-year period ending in June 2021, 82.7%, 76.2% and 69.6% of the Indian equity large-cap, ELSS (tax saver funds) and mid-/small-cap funds underperformed their respective benchmarks.

“Over the one-year period ending in June 2021, mid-/small-cap was the best performing fund category amongst the equity categories covered in this scorecard with the S&P BSE 400 MidSmallCap Index returning 90.6%. Though market participants invested in this category of funds may have witnessed a widespread in fund returns, during this period, the difference in the first & third quartile fund returns was as high as 27.9% posing fund selection challenges to investors,” said Akash Jain, associate director, Global Research & Design, S&P Dow Jones Indices.

In the five-year period, the asset-weighted returns lagged their respective benchmark returns in each of the Indian equity categories: Large-cap funds (by 26 bps), ELSS funds (by 138 bps) and mid-/small-cap funds (by 198 bps).

Moreover, 71.4% and 97.9% of the Indian Government Bond and Indian Composite Bond funds underperformed their respective benchmarks over a five-year period ending in June 2021.

The SPIVA India Scorecard reports on the performance of actively managed Indian mutual funds compared to their respective benchmark indices over one-, three-, and five-year investment horizons. With this edition of the scorecard, the index provider has introduced style consistency of funds and extended the study over the 10-year period ending December 2018.

The earlier report, which was released in April, showed that 81% of large cap funds underperformed their benchmarks over the past one year ended December 2020. Also, 67% of mid- and small-caps and 65% of ELSS were beaten by their benchmarks till December 2020.

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