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In mutual funds, investors often rely on historical performance to guide their decisions. However, a recent analysis of 146 equity mutual fund schemes has shed light on a concerning trend: around 60 schemes have failed to beat their respective benchmarks over three, five, seven, and 10-year periods.
Approximately 41% of the funds have underperformed, indicating higher risk. This raises questions about the popular belief that ‘mutual funds sahi hai!’
The underperforming schemes hail from various categories, including midcap, ELSS, large & mid cap, largecap, flexicap, focused fund, value fund, and small cap. While some funds struggled across all horizons, others stumbled in specific periods. For instance, 13 midcap schemes failed to beat their benchmarks consistently.
The study focused on schemes that underperformed in all four horizons, omitting those that lagged in only one, two, or three periods. Multi-cap schemes were excluded due to the unavailability of benchmark data.
ELSS funds are tax-saving mutual funds that invest primarily in equities. They offer tax benefits under Section 80C of the Income Tax Act, making them popular among investors seeking tax savings with the potential for long-term capital appreciation.
| Scheme | 3 Years | 5 Years | 7 Years | 10 Years |
| NIFTY 500 – TRI | 19.47% | 18.32% | 16.13% | 16.79% |
| S&P BSE 500 – TRI | 19.51% | 18.47% | 16.29% | 16.89% |
| Aditya Birla SL ELSS Tax Saver Fund | 9.76% | 10.55% | 11.15% | 15.02% |
| Axis ELSS Tax Saver Fund | 9.77% | 13.95% | 13.52% | 16.71% |
| Baroda BNP Paribas ELSS Tax Saver Fund | 15.53% | 16.93% | 14.35% | 16.13% |
| Edelweiss ELSS Tax saver Fund | 16.72% | 15.87% | 13.26% | 14.93% |
| HSBC ELSS Tax saver Fund | 17.76% | 15.58% | 13.30% | 15.97% |
| HSBC Tax Saver Equity Fund | 17.72% | 16.76% | 13.41% | 16.00% |
| ICICI Pru ELSS Tax Saver Fund | 17.87% | 17.00% | 14.25% | 16.42% |
| LIC MF ELSS Tax Saver | 14.86% | 14.19% | 12.91% | 14.66% |
| Quantum ELSS Tax Saver Fund | 17.50% | 14.69% | 12.18% | 14.81% |
| Sundaram Diversified Equity | 16.85% | 14.72% | 11.75% | 15.06% |
| Taurus ELSS Tax Saver Fund | 19.39% | 16.37% | 15.41% | 16.00% |
| UTI ELSS Tax Saver Fund | 14.89% | 16.39% | 13.60% | 15.09% |
Flexicap funds, also known as multi-cap funds, have the flexibility to invest across market capitalizations without any predefined allocation. They can switch between large, mid, and small-cap stocks based on market conditions and fund manager’s discretion, offering diversification across market segments.
| Scheme | 3 Years | 5 Years | 7 Years | 10 Years |
| NIFTY 500 – TRI | 19.47% | 18.32% | 16.13% | 16.79% |
| S&P BSE 500 – TRI | 19.51% | 18.47% | 16.29% | 16.89% |
| Bandhan Flexi Cap Fund | 16.19% | 14.59% | 12.30% | 15.50% |
| Canara Rob Flexi Cap Fund | 15.66% | 17.11% | 15.99% | 16.02% |
| HSBC Flexi Cap Fund | 18.47% | 17.14% | 13.57% | 16.15% |
| LIC MF Flexi Cap Fund | 14.41% | 13.51% | 10.69% | 12.07% |
| Taurus Flexi Cap Fund | 17.93% | 13.37% | 11.23% | 12.77% |
| UTI Flexi Cap Fund | 9.37% | 14.85% | 13.94% | 15.19% |
Focused funds concentrate their investments in a limited number of stocks, typically between 20 to 30, as opposed to diversified funds that hold a larger number of stocks. This focused approach allows fund managers to capitalize on their best ideas, potentially offering higher returns but also carrying higher risk.
| Scheme Name | 3 Years | 5 Years | 7 Years | 10 Years |
| NIFTY 500 – TRI | 19.47% | 18.32% | 16.13% | 16.79% |
| S&P BSE 500 – TRI | 19.51% | 18.47% | 16.29% | 16.89% |
| Aditya Birla SL Focused Fund | 15.33% | 16.21% | 13.31% | 15.65% |
| Axis Focused 25 Fund | 6.80% | 12.52% | 12.82% | 14.73% |
| Bandhan Focused Equity Fund | 14.47% | 14.73% | 13.72% | 13.39% |
| DSP Focus Fund | 14.47% | 15.72% | 12.25% | 15.51% |
| Motilal Oswal Focused Fund | 10.92% | 14.77% | 12.35% | 14.82% |
| Sundaram Focused Fund | 16.13% | 17.70% | 14.88% | 15.95% |
These funds invest in a mix of large-cap and mid-cap stocks, offering a balance between stability and growth potential. They aim to provide investors with exposure to both established companies (large-cap) and faster-growing companies (mid-cap) in a single investment.
| Scheme Name | 3 Years | 5 Years | 7 Years | 10 Years |
| NIFTY LargeMidcap 250 – TRI | 23.03% | 20.71% | 17.71% | 19.38% |
| Aditya Birla SL Equity Advantage Fund | 13.89% | 15.26% | 11.69% | 16.52% |
| DSP Equity Opportunities Fund | 20.26% | 19.37% | 15.31% | 18.19% |
| Edelweiss Large & Mid Cap Fund | 20.51% | 19.30% | 16.94% | 17.39% |
| Franklin India Equity Advantage Fund | 17.06% | 15.09% | 12.68% | 15.45% |
| Invesco India Large & Mid Cap Fund | 18.98% | 17.72% | 16.32% | 17.21% |
| Kotak Equity Opp Fund | 20.93% | 19.70% | 16.05% | 18.48% |
| Nippon India Vision Fund | 21.46% | 18.89% | 13.83% | 16.34% |
| SBI Large & Midcap Fund | 22.40% | 19.50% | 16.69% | 18.44% |
| Sundaram Large and Mid Cap Fund | 18.90% | 16.81% | 15.32% | 17.59% |
| Tata Large & Mid Cap Fund | 19.54% | 19.06% | 15.10% | 17.12% |
Large-cap funds invest predominantly in stocks of large, well-established companies with a track record of stable performance. They are considered relatively less risky compared to midcap and small-cap funds, making them suitable for conservative investors seeking stable returns.
| Scheme Name | 3 Years | 5 Years | 7 Years | 10 Years |
| NIFTY 100 – TRI | 15.97% | 16.23% | 15.11% | 15.41% |
| S&P BSE 100 – TRI | 16.81% | 16.80% | 15.55% | 15.60% |
| Axis Bluechip Fund | 9.75% | 13.76% | 14.62% | 14.59% |
| Bandhan Large Cap Fund | 15.16% | 15.54% | 14.04% | 13.60% |
| DSP Top 100 Equity Fund | 13.93% | 14.48% | 11.47% | 13.20% |
| Franklin India Bluechip Fund | 13.35% | 14.12% | 11.85% | 13.70% |
| Groww Largecap Fund | 14.21% | 13.24% | 12.22% | 13.28% |
| HSBC Large Cap Fund | 13.78% | 15.75% | 13.49% | 14.42% |
| LIC MF Large Cap Fund | 11.66% | 13.73% | 12.01% | 13.03% |
| PGIM India Large Cap Fund | 11.92% | 13.18% | 11.87% | 13.68% |
| Taurus Large Cap Fund | 15.38% | 13.78% | 11.10% | 12.71% |
| UTI Large Cap Fund | 13.78% | 15.15% | 13.67% | 14.78% |
Midcap funds invest in stocks of mid-sized companies with the potential for high growth. They are considered riskier than large-cap funds but offer the potential for higher returns over the long term, making them suitable for investors with a higher risk appetite.
| Scheme Name | 3 Years | 5 Years | 7 Years | 10 Years |
| Nifty Midcap 100 – TRI | 31.06% | 24.43% | 18.27% | 21.66% |
| Nifty Midcap 150 – TRI | 30.18% | 25.13% | 20.12% | 23.19% |
| S&P BSE 150 MidCap – TRI | 29.63% | 25.30% | 19.84% | 22.89% |
| Aditya Birla SL Midcap Fund | 25.06% | 18.85% | 13.89% | 18.88% |
| Axis Midcap Fund | 19.06% | 20.38% | 18.69% | 20.73% |
| Baroda BNP Paribas Mid Cap Fund | 25.70% | 22.77% | 16.82% | 20.56% |
| DSP Midcap Fund | 17.21% | 18.56% | 14.21% | 19.90% |
| Franklin India Prima Fund | 21.47% | 18.64% | 14.96% | 20.15% |
| HSBC Midcap Fund | 23.68% | 18.96% | 15.63% | 21.53% |
| ICICI Pru Midcap Fund | 25.90% | 21.30% | 16.67% | 20.95% |
| Invesco India Midcap Fund | 24.30% | 22.18% | 18.38% | 21.80% |
| SBI Magnum Midcap Fund | 26.15% | 22.96% | 15.73% | 20.31% |
| Sundaram Mid Cap Fund | 25.09% | 19.39% | 14.02% | 20.25% |
| Tata Mid Cap Growth Fund | 25.51% | 22.96% | 17.93% | 21.97% |
| Taurus Mid Cap Fund | 26.74% | 22.57% | 18.31% | 21.45% |
| UTI Mid Cap Fund | 22.53% | 21.38% | 15.84% | 20.74% |
Small-cap funds invest in stocks of small-sized companies with high growth potential. They are considered the riskiest among equity funds due to the volatility associated with small-cap stocks but offer the potential for significant capital appreciation for investors with a high-risk tolerance.
| Scheme Name | 3 Years | 5 Years | 7 Years | 10 Years |
| S&P BSE 250 Small Cap – TRI | 33.41% | 25.01% | 17.60% | 20.06% |
| Aditya Birla SL Small Cap Fund | 25.31% | 18.29% | 12.99% | 18.94% |
Value funds follow a value investing strategy, aiming to invest in stocks that are trading at a lower price relative to their intrinsic value. These funds look for undervalued stocks with the potential for price appreciation over time, making them suitable for long-term investors looking for bargains in the market.
| Scheme Name | 3 Years | 5 Years | 7 Years | 10 Years |
| NIFTY 500 – TRI | 19.47% | 18.32% | 16.13% | 16.79% |
| S&P BSE 500 – TRI | 19.51% | 18.47% | 16.29% | 16.89% |
| Quantum Long Term Equity Value Fund | 17.39% | 14.57% | 12.08% | 14.74% |
| UTI Value Fund | 17.81% | 18.31% | 15.17% | 15.03% |
It’s crucial for investors not to base their decisions solely on past performance. Factors like risk appetite, investment horizon, and financial goals should always be considered. Past performance does not guarantee future success.
Conclusion
While the analysis serves as a wake-up call for investors, it’s essential to approach fund selection with a holistic view. Rather than relying solely on past returns, investors should consider a fund’s strategy, management team, and risk profile.
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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
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