Returns of equity MF schemes remain weak despite Indian equity markets making sharp recovery from March lows

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Published: July 16, 2020 2:45 AM

Of 255 schemes which have lost money for investors, five have given negative returns in excess of 30% in the last one year.

The performance of equity schemes has remained negative even for two- and three-year time frames. The performance of equity schemes has remained negative even for two- and three-year time frames.

Despite the Indian equity markets making a sharp recovery from its March lows, the performance of equity mutual fund schemes has remained weak. Around 78% of a total of 328 equity schemes have given negative returns in the last one year. Of 255 schemes which have lost money for investors, five have given negative returns in excess of 30% in the last one year.

Data from Value Research show that category average returns for largecap funds is (-)5.66% in the last one year, while Sensex TRI is down by 5% in the same time frame. However, around 50 largecap schemes out of 70 have underperformed the Sensex TRI in last one year.

The performance of equity schemes has remained negative even for two- and three-year time frames. Out of 328 schemes, around 65% of the schemes have given negative returns in the last two years and 41% in the last three years. However, for the period of five years, only 19 of the 328 schemes have given negative returns.

In the last one year, the worst performance of the schemes came from PSBs, infrastructure sector, small-cap funds and banking funds. In terms of sectoral returns, the banking sector saw its category average at
(-)22.83%, with all the 15 schemes giving negative returns. Of 36 mid-cap and small cap equity schemes, only seven have managed to post positive returns.

The category returns for smallcap funds is (-)7.66% in the last one year and (-)8.73% in last two years, show Value Research data. Returns are as on July 8, 2020.

Neelesh Surana, CIO at Mirae Asset Global Investments (India), said: “Equity returns have been meagre as the Indian economy was going through downturn even before March and now it has been hit by the pandemic. Also, in the last two years, Indian equity markets were polarised with a section of value stocks underperforming — collectively these are two key reasons for underperformance of many equity schemes.”

However, categories such as international funds and healthcare funds have given positive returns in the last one year. Market participants attribute it to rupee depreciation and positive performance of the US equity markets in the last one year.

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