In the last two years, infrastructure schemes, public sector undertaking (PSU) funds, along with mid- and small-cap funds have fared the worst.
The tide may have turned for equity markets since the government cut corporate taxes, but 33% equity-oriented schemes over the past two years have given negative returns. Of a total 372 equity schemes, 124 schemes have given negative returns in the last two years, which is 33% of the total universe. Twelve equity schemes have given negative returns in excess of 10%. HSBC Infrastructure Fund fared the worst, where investors lost 20.60% over two years, data from Value Research shows.
In the last two years, infrastructure schemes, public sector undertaking (PSU) funds, along with mid- and small-cap funds have fared the worst. In terms of sectoral returns, infrastructure sector funds clocked negative returns of 4.49%%, with 20 out of total 23 schemes faring badly. Of 36 mid-cap and small-cap equity schemes, 29 schemes have given negative returns in the last two years. The returns are as on 18 October 2019.
Mid-cap funds have delivered negative returns of 2.53% while small-cap schemes have delivered negative returns of 6.05% over two years. Nifty Small Cap TRI is down by 16.17% in the last two years and Mid Cap 100 TRI is down by 6.37% in the last two years. Sundaram Small Cap Fund, Aditya Birla Sun Life Pure Value Fund, Kotak Bank PSU ETF and HSBC Small Cap Equity Fund are among the worst performing equity schemes over the past two years having lost anywhere between 13% and 14%. In the mid-cap segment, schemes such as Aditya Birla Sun Life Mid Cap Fund, SBI magnum Mid Cap Fund have given negative returns of 8.48% and 6.42%, respectively, in the last two years.
Market participants say that valuations of mid- and small-cap stocks had run up in 2017 and in the last two years there has been sharp correction, which has led to fall in the category. Kaustubh Belapurkar, director – manager research at Morningstar Investment Advisers India, says, “In 2017 the small- and mid-cap category had seen significant run up and valuations had run to exuberant levels. So investors who had entered in 2017 in mid- and small-cap schemes, most of rally was behind them and after that there has been correction.” He also added that mid- and small-caps are sometimes volatile in the short-run, but make money over longer time frame.
In the last two years, Nifty 50 TRI has given returns of 8.35%, but it was driven by handful of stocks. HDFC Bank, Reliance Industries, Kotak Mahindra Bank, ICICI Bank and HDFC have contributed most in the indices. Even the broader markets have been in a bearish mode for close to two years now; the number of companies with a market capitalisation of Rs 1,000 crore or more has fallen to 676 as on October 22, from the peak of 853 in Q3FY18 and 767 at the beginning of 2019.
Neelesh Surana, CIO at at Mirae Asset Global Investments (India), says, “In the last 18-24 months there has been polarisation in the markets where top few names have continued to do well. But with slowing economy and lower transmission of interest rate, which has led to impact the mid- and small-cap stocks.” He also added that going forward rally should be more broad-based and we are of an opinion that the polarisation should reduce.
Market participants say that performance of large-cap schemes improved post announcement of corporate tax cut on September 20. Since the announcement of cut in corporate tax, the Sensex has moved up by around 8%. In the last one year, all the large-cap funds have given positive returns, with around 72 equity schemes out of 88 schemes giving returns in excess of 10%. In the last one year, Nifty TRI have given returns of 13.13%. Axis Bluechip Fund and BNP Paribas Large Cap funds have given returns of 24.49% and 20.98%, respectively, in the last one year.