SIPs of 50% equity schemes give negative returns in last 3 years

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Published: July 31, 2020 3:50 AM

Schemes such as Aditya Birla Sun Life Small Cap Fund, L&T Emerging Business Fund and Franklin India Smaller Companies Fund have given negative SIP returns of (-)15 to (-)13%.

SIPs of 164 schemes that have given negative returns in the last three years include equity funds and thematic equity funds.SIPs of 164 schemes that have given negative returns in the last three years include equity funds and thematic equity funds.

The mutual fund industry has seen steady inflows through systematic investment plans (SIPs) over the past few years. However, investors who continued to invest through SIPs for three years have seen dismal returns. Out of the total universe of 329 equity schemes, SIPs of around 50% of equity schemes have given negative returns in the same period.

SIPs of 164 schemes that have given negative returns in the last three years include equity funds and thematic equity funds.

In the last three years, SIPs in active funds in the infrastructure, small cap and banking categories have delivered negative returns ranging from (-)13 to (-)23%, show the data from Value Research. The average SIP return of smallcap funds for three-year period was (-)6.52%, with six schemes out of 14 small-cap schemes giving negative returns of more than 10%. Out of total 36 mid and small cap equity funds, SIP returns of 27 funds have been negative in the three-year period.

Schemes such as Aditya Birla Sun Life Small Cap Fund, L&T Emerging Business Fund and Franklin India Smaller Companies Fund have given negative SIP returns of (-)15 to (-)13%.

G Pradeepkumar, CEO, Union AMC, said historically SIP returns have been quite good and have beaten most of the other forms of the investments. “However, in the last few years, the rally in the stocks markets was concentrated and driven by handful of stocks, which could be one of the reasons for weak performance of equity schemes,” said Pradeepkumar.

Investors now have started worrying about their investments in equity SIPs as long-term returns have been poor. This has led to lower inflows through SIPs. Amfi data show inflows through SIPs stood at Rs 7,917 crore in June, the lowest since September 2018.

“Post 2017, midcaps and smallcap fund have not performed well due to the slowdown in the economy. We believe returns will come back in equity funds once there is broad-based rally in the markets,” said Pradeepkumar.

However, in the last three years, large-cap funds managed to do better than mid- and small-cap funds. The average SIP return of large-cap funds was 2.29% in the last three years and 5.76% in the last five years.

However, the rise in the equity markets in the past few months has helped funds post better returns. SIP returns in 94 equity schemes have been more than 10% in the last one year.

Market participants said SIPs returns have been poor in the last three-year and five-year time frames, but invetsors should continue to invest and take the advantage of volatility in the markets. Jimmy Patel, MD and CEO at Quantum Mutual Fund, said, “Markets have been volatile in the past, but SIP is the best form of savings. Investors should not cancel SIPs and have faith in equity markets because wealth gets generated through equity only.”

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