Benchmark indices are at lifetime highs but nearly two dozen large-cap funds have under-performed the markets this year with a dozen turning in negative returns, data from Morningstar shows.
Benchmark indices are at lifetime highs but nearly two dozen large-cap funds have under-performed the markets this year with a dozen turning in negative returns, data from Morningstar shows. As Nilesh Shah, MD, Kotak Mahindra AMC, points out the rally is concentrated in seven or eight stocks that have pushed up the Sensex. “Most funds are underweight in these stocks,” Shah says, adding that quality is getting a disproportionately high premium today. “The defensive nature of these stocks and quality of governance have attracted investors to these companies despite very high valuations,” he explains.
While the Sensex has gained 9.63% in 2018 so far, the broader Nifty has put on 7.1%. To be sure, seven months is not a long-enough time to assess the performance of schemes, as Swati Kulkarni, executive V-P, UTI MF, rightly contends.
“Having said that, I think there has been more divergence in terms of returns than is the norm for the last two-three years. So one not only needs to get the sector call right, one must also pick the right stocks since there has been a big difference in returns within a sector,” Kulkarni observed.
Anoop Bhaskar, head — equity at IDFC AMC, says the very heavyweights in the benchmarks that have done well have been underweight in the portfolios of most large-cap funds. Bhaskar believes that as the macro-fundamentals improve and there is clarity on elections, the trend could get reversed. Kotak’s Shah believes the phase is a temporary one and expects fund performance to bounce back.