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July saw a strong outperformance in equities, with the benchmark Nifty
index rising by almost 9 percent – its best performance seen since November 2020. The reasons for outperformance include FPIs turned net buyers and invested Rs 5249cr in the July-after nine months of continuous selling.
The softening dollar index and good corporate earnings aided the markets. The Fed
hike in interest rates was in line with expectations, suggesting that the impact of rate hikes has been factored in.
The best performing large cap
mutual fund scheme rose by 13.4 percent, as compared to Nifty which rose by 8.7 percent. A total of 18 large cap schemes outperformed the benchmark Nifty index and even the Nifty Next 50 Index which gained by 12 percent.
The top 5 large-cap schemes having the best performance in July include Taurus Large Cap Equity HSBC Large Cap Equity, Axis Blue Chip, Bank of India Blue Chip and Nippon India Large Cap which rose between 10-13 percent. The key holdings of these schemes include M&M, Siemens
, ICICI Bank
, HDFC Bank
, Bajaj Finance etc. These indices have higher exposure to the financial and technology sectors.
, Founder at Rupee With Rushabh Investment Service said that 17 out of 32 active large-cap schemes have underperformed the Nifty 50 TRI
which is around 53% of underperformance. The rest of the schemes could have outperformed on the back of the broad-based rally apart from the Nifty 50 companies which we saw in July along with the fund manager’s right stock selection and allocation.
Even from a long-term perspective on a 7- and 10-year returns basis around 96% and 56% of the active large cap category fund have underperformed the Nifty 50 TRI.
He also stated that this clearly shows fund managers are struggling and are having a tough time to deliver outperformance against the index. At this current juncture looking at the underperformance rate in the active large-cap segment it is high time investors start to give utmost importance to investing in the passive / index funds in the large-cap segment.
Investors can either go full passive or can invest in both active and passive. But surely passive funds cannot be ignored and deserve a substantial part of one’s portfolio.