We evaluate the performance of 28 active large-cap mutual funds by comparing their 1,2,3,4,5,6,7,8-year SIP returns to Nifty 50 TRI. Investors would be aware of the explicit underperformance of large-cap funds from early 2018, while the actual underperformance began long before that: Active mutual funds have been fighting to beat Nifty 50 for seven years!

One of the reasons for the explicit underperformance was a market imbalance, with few stocks determining the Nifty’s returns while the rest of the market fell: Nifty 50 versus Nifty 50 equilibrium index return differential at an all-time high! (December 2019).

The market crash of March 2020 and the subsequent rebound had eliminated some of these disparities and the performance of active large-cap funds improved: active large-cap MFs rebounded along with equilibrium indices. We will continue to evaluate your SIP performance as of January 20, 2021 and compare it with the situation a year earlier.

Base date January 20, 2021

This means that we will evaluate the one year SIP yield from February 1st, 2020 to January 1st, 2021 and calculate the yield on January 20th, 2021. two-year SIp returns from February 1, 2019 to January 1, 2021 and calculating the returns on January 20, 2021 and so on.

  • 1Y SIP: 2 of 29
  • 2Y: SIP: 7 of 29
  • 3J: SIP: 6 of 28
  • 4Y: SIP: 4 of 28
  • 5Y: SIP: 5 of 28
  • 6Y: SIP: 4 of 28
  • 7Y: SIP: 8 of 28
  • 8Y: SIP: 12 of 28

Base date January 20, 2020

This means that we will evaluate the one year SIP yield from February 1st, 2019 to January 1st, 2020 and calculate the yield on January 20th, 2020. two-year SIp returns from February 1, 2018 to January 1, 2020 and calculating returns on January 20, 2020 and so on.

None of the active large-cap funds with a return better than the Nifty 50 TRI index

  • 1Y SIP: 21 of 28
  • 2Y: SIP: 12 of 28
  • 3J: SIP: 6 of 28
  • 4Y: SIP: 5 of 28
  • 5Y: SIP: 5 of 28
  • 6Y: SIP: 12 of 28
  • 7Y: SIP: 14 of 28
  • 8Y: SIP: not applicable

Not much has changed from before the crash (January 2020) to now (January 2021). There is little point in figuring out the names of consistent outperformers as they would also be constantly changing. For example, Franklin Bluechip, who has underperformed for several years, outperformed last year.

The outperformers themselves don’t have much style of pure history, as the SEBI mandate of 80% large caps (Nifty 100) will only apply from mid-2018.

What should investors do?

This is only for those who are confused. If you hold below average active large caps

Option 1: Moving to Index Funds: We previously discussed how to combine Nifty & Nifty Next 50 funds to create large mid-cap index portfolios.

Option 2: Conversion to hybrid funds. At least the expense ratio pays off for periodic realignment and relatively low volatility.

What about mid and small caps? Can’t I use active funds here as fund managers can easily outperform the index here? Unfortunately, They may beat the midcap or smallcap index with better regularity, but they are still battling the Nifty Next 50.

Some people advise taking a scattergun approach: buy some active funds and some index funds to get “average benefit.” This is terrible advice with unquantifiable benefits.

If you want to switch to index funds, the time has come when your portfolio is small. When future investments in index funds (and future moves from active to index) can do the job.

There will always be “one fund” that outperforms the index. It is trivial to recognize one after the fact and start investing. The problem is that the game of musical chairs starts again as soon as you start investing.

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Both boy and girl versions of Chinchu are given a superpower
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About the author Pattabiraman Editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and lead author of freefincal. He is an Associate Professor at the Indian Institute of Technology in Madras. since August 2006. Connect with him via Twitter or Linkedin Pattabiraman co-authored two printed books, You can also be rich with goal-oriented investing (CNBC TV18) and Game changer and seven others free e-books on various money management topics. He is the patron and co-founder of “Paid India,“An organization promoting impartial, commission-free investment advice. He conducts free money management sessions for companies and associations based on money management. Include previous engagements World bank, RBI, BHEL, Asian Colors, Cognizant, Madras Nuclear Power Plant, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. Write to Pattu for a chat [at] freefincal [dot] com


About freefincal & its Content Policy Freefincal is a news media organization dedicated to providing original analysis, reports, reviews and insights into developments in mutual funds, stocks, investments, retirement planning and personal finance. We do this without any conflict of interest or bias. follow us on Google news. Freefincal serves more than one million readers (2.5 million page views) annually with articles that are based only on facts and detailed analysis of its authors. All statements are verified from credible and knowledgeable sources prior to publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented are only conclusions that are supported by verifiable, reproducible evidence / data. Contact information: Letters {at} freefincal {dot} com (sponsored contributions or paid collaborations are not maintained)


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