The pandemic and subsequent lockdowns led to a lot of stock prices dropping drastically within no time. While almost all stocks suffered, small-caps were one the worst-hit.
In 2020, the pandemic and subsequent lockdowns led to a lot of stock prices dropping drastically within no time. While almost all stocks suffered, small-caps were one the worst-hit. Eventually, the government announced economic stimulus packages to boost liquidity in the system that is still floating in the market. According to a survey by Groww, some equity mutual funds were seen to be popular among investors under various fund categories.
For instance, large-cap funds saw a growth in average Asset Under Management (AUM) of 4.22 per cent. They performed better in 2020 as compared to 2019. The median annual returns of all large-cap mutual funds with Assets Under Management of greater than 500 crores was 13.31 per cent in 2020 as compared to 12.44 per cent in 2019. The average return was more too with Large-cap funds averaging 12.49 per cent in 2020 as compared to 12.35 per cent in 2019.
On the Groww platform, these were the top Large-cap funds chosen by investors;
- Axis Bluechip Fund Direct Plan-Growth
- ICICI Prudential Bluechip Fund Direct-Growth
- Mirae Asset Large Cap Fund Direct-Growth
- Nippon India Large Cap Fund Direct-Growth
- SBI Bluechip Direct Plan-Growth
The data states the Mid Cap Fund sector saw the biggest improvement in 2020 in terms of performance. In 2019, the performance of midcap funds was mediocre at best with median returns at 4.61 per cent and mean returns of 4.48 per cent. However, they have witnessed a significant turnaround in 2020, with median returns of 23.85 per cent. The top 5 midcap funds have all generated a return of more than 28 per cent annual returns for their investors in 2020. These funds also saw a lot of cash inflow in 2020 with average assets under management growing by 14.84 per cent in 2020.
On the Groww platform, these were the top Mid-cap funds chosen by investors;
- Axis Midcap Direct Plan-Growth
- DSP Midcap Direct Plan-Growth
- Kotak Emerging Equity Fund Direct-Growth
- L&T Midcap Fund Direct-Growth
- Invesco India Mid Cap Fund Direct-Growth
With the country edging itself out of the lockdown, investors are turning towards stocks to earn profits and are looking for potential multi-baggers. This has led to an increase in the trading volumes of small-cap stocks.
Harsh Jain, Co-founder and COO, Groww says, “Talking about mutual funds, in September, the Securities and Exchange Board of India (SEBI) released a circular mandating a minimum investment in small-cap stocks for multi-cap funds. Until then, most multi-cap funds were largely investing in large-cap stocks. With this new mandate, there was a surge in mutual funds buying small-cap stocks to adhere to the new norms. As a result, small-cap stock prices started rising resulting in a rally in small-cap funds.”
In terms of annual returns, small-cap averaged 24.9 per cent in 2020 as compared to a negative 0.39 per cent in 2019. They saw a growth of 18.49 per cent in terms of AUM in 2020.
Jain says, “In fact, in certain sectors, small-cap stocks have outperformed mid-cap stocks too. As is the case with mid-caps, the fund manager of a small-cap stock plays an important role in its success.”
On the Groww platform, these were the top Small-cap funds chosen by investors;
- SBI Small Cap Fund Direct-Growth
- Axis Small Cap Fund Direct-Growth
- HDFC Small Cap Fund Direct-Growth
- Nippon India Small Cap Fund Direct-Growth
- L&T Emerging Businesses Fund Direct-Growth
Multi-cap funds are usually preferred by new investors or those seeking equity diversification. With exposure to stocks from large, mid, and small-cap companies, these funds are the most difficult to manage during volatile market conditions.
The median annual return among multi-cap funds was 14.31 per cent and the average return was 15.42 per cent in 2020. The same return in 2019 was 9.27 per cent and 8.88 per cent respectively. In terms of growth, average assets under management grew 2.4 per cent as far as multi-cap funds were concerned.
On the Groww platform, these were the top Multi cap funds chosen by investors;
- Parag Parikh Long Term Equity Fund Direct-Growth
- Kotak Standard Multicap Fund Direct-Growth
- Aditya Birla Sun Life Equity Fund Direct-Growth
- Motilal Oswal Multicap 35 Fund Direct-Growth
- Axis Multicap Fund Direct-Growth