Moneycontrol PRO

Active MF schemes: How these equity mutual funds fared when markets remained flat

Indian benchmark indices such as the BSE Sensex and Nifty 50 went on the back foot and now are trading at the same level seen a year earlier. Against this backdrop, here we analyse how the various active equity mutual fund categories fared during this period and which of those stocks helped to deliver returns or contain the loss well.

July 27, 2022 / 11:56 AM IST
The Indian equity market has been volatile over the last nine months. Factors including disruption in global supply chain mainly due to the Russia-Ukraine war, rising inflationary concerns and increasing interest rates across economies including India spooked the markets and added to the selling pressure. In the last one-year period, after touching their peaks in October 2021, Indian benchmark indices such as the BSE Sensex and Nifty 50 went on the back foot and now are trading at the same level seen a year earlier. The performance of these largecap indices in the period between July 1, 2021, and July 1, 2022, was almost flat. Against this backdrop, we looked at how the various active equity mutual fund categories fared during this period and which of those stocks helped to deliver returns or contain the loss well. Source: ACEMF.
The Indian equity market has been volatile over the last nine months. Factors including disruption in global supply chain mainly due to the Russia-Ukraine war, rising inflationary concerns and increasing interest rates across economies including India spooked the markets and added to the selling pressure. In the last one-year period, after touching their peaks in October 2021, Indian benchmark indices such as the BSE Sensex and Nifty 50 went on the back foot and now are trading at the same level seen a year earlier. The performance of these largecap indices in the period between July 1, 2021, and July 1, 2022, was almost flat. Against this backdrop, we looked at how the various active equity mutual fund categories fared during this period and which of those stocks helped to deliver returns or contain the loss well. Source: ACEMF.
Schemes that bet on stocks in sectors such as auto, services, FMCG and infrastructure managed to contain the downside and delivered positive returns. On the other hand, schemes that focused on pharma, banks, energy and IT stocks corrected notably and delivered negative returns. Among the diversified equity funds, smallcap and multicap funds delivered positive returns while largecap, large and midcap and flexicap funds delivered negative returns. On the hybrid side, conservative hybrid, equity savings and balanced advantage funds outperformed aggressive hybrid funds.
Schemes that bet on stocks in sectors such as auto, services, FMCG and infrastructure managed to contain the downside and delivered positive returns. On the other hand, schemes that focused on pharma, banks, energy and IT stocks corrected notably and delivered negative returns. Among the diversified equity funds, smallcap and multicap funds delivered positive returns while largecap, large and midcap and flexicap funds delivered negative returns. On the hybrid side, conservative hybrid, equity savings and balanced advantage funds outperformed aggressive hybrid funds.
Auto stocks, beaten down due to supply-side woes and weak demand, have come into the limelight over the last few months thanks to a decline in steel prices coupled with increasing demand in the passenger vehicle segment. Better performance of the stocks in allied sectors like logistics too helped the UTI Transportation and Logistics Fund to deliver positive returns. The services sector too bounced back post the pandemic thanks to improved consumer sentiments. Stocks from sectors like hotels and travel and tourism saw a surge in recent months.
Auto stocks, beaten down due to supply-side woes and weak demand, have come into the limelight over the last few months thanks to a decline in steel prices coupled with increasing demand in the passenger vehicle segment. Better performance of the stocks in allied sectors like logistics too helped the UTI Transportation and Logistics Fund to deliver positive returns. The services sector too bounced back post the pandemic thanks to improved consumer sentiments. Stocks from sectors like hotels and travel and tourism saw a surge in recent months.
Pharma stocks fell out of favour with investors with a poor performance over the last two quarters. Increased raw material costs pulled down overall profitability at these companies. Pricing pressures in the US also added to margin pressures. Stocks of big players like Aurobindo Pharma, Lupin and Glenmark Pharmaceuticals, and healthcare companies including Metropolis Healthcare and Thyrocare Technologies, corrected 30-55 percent over the last one year. On their part, despite delivering better performance in the last quarter, banking stocks have witnessed aggressive selling pressure from the foreign investors. Stocks of NBFC players that were held by these schemes, such as Manappuram Finance, PNB Housing Finance and Repco Home Finance, too corrected significantly in the last one year.
Pharma stocks fell out of favour with investors with a poor performance over the last two quarters. Increased raw material costs pulled down overall profitability at these companies. Pricing pressures in the US also added to margin pressures. Stocks of big players like Aurobindo Pharma, Lupin and Glenmark Pharmaceuticals, and healthcare companies including Metropolis Healthcare and Thyrocare Technologies, corrected 30-55 percent over the last one year. On their part, despite delivering better performance in the last quarter, banking stocks have witnessed aggressive selling pressure from the foreign investors. Stocks of NBFC players that were held by these schemes, such as Manappuram Finance, PNB Housing Finance and Repco Home Finance, too corrected significantly in the last one year.
Two-thirds of the largecap funds underperformed the Nifty 50 index in the last one year, one reason being allocation to non-Nifty stocks. For instance, the Nifty Next 50 index fell close to 5 percent during the period. Being overweight on banking and pharma stocks too pulled down returns.
Two-thirds of the largecap funds underperformed the Nifty 50 index in the last one year, one reason being allocation to non-Nifty stocks. For instance, the Nifty Next 50 index fell close to 5 percent during the period. Being overweight on banking and pharma stocks too pulled down returns.
ICICI Pru Large & Mid Cap fund topped the chart. Its significant allocation to auto stocks such as Minda Industries and Mahindra & Mahindra, and to service industry stocks such as Indian Hotels, Persistent Systems and Bharti Airtel helped the scheme handle the market downturn well. Some stocks held by large and midcap category schemes that corrected significantly over the past year included Samvardhana Motherson International, Natco Pharma, Gujarat State Petronet, Whirlpool of India and Bharat Petroleum.
ICICI Pru Large & Mid Cap fund topped the chart. Its significant allocation to auto stocks such as Minda Industries and Mahindra & Mahindra, and to service industry stocks such as Indian Hotels, Persistent Systems and Bharti Airtel helped the scheme handle the market downturn well. Some stocks held by large and midcap category schemes that corrected significantly over the past year included Samvardhana Motherson International, Natco Pharma, Gujarat State Petronet, Whirlpool of India and Bharat Petroleum.
Value midcap stocks withstood the market correction well compared to quality midcap stocks. This, in turn, helped midcap schemes that had exposure to value stocks contain losses well. Motilal Oswal Midcap 30 fund was a top performer among the peers. A few stocks that were held by many midcap schemes saw big corrections during the period including Indiamart Intermesh, Manappuram Finance, Metropolis Healthcare, Gujarat Gas and Ramco Cements.
Value midcap stocks withstood the market correction well compared to quality midcap stocks. This, in turn, helped midcap schemes that had exposure to value stocks contain losses well. Motilal Oswal Midcap 30 fund was a top performer among the peers. A few stocks that were held by many midcap schemes saw big corrections during the period including Indiamart Intermesh, Manappuram Finance, Metropolis Healthcare, Gujarat Gas and Ramco Cements.
Only five out of 26 schemes delivered positive returns over the last one year. HDFC Flexi Cap was ahead of the pack followed by JM Flexicap Fund. Stocks within the portfolio of flexicap funds that declined in a big way during the period include Samvardhana Motherson International, Lupin, Indraprastha Gas and Bharat Petroleum.
Only five out of 26 schemes delivered positive returns over the last one year. HDFC Flexi Cap was ahead of the pack followed by JM Flexicap Fund. Stocks within the portfolio of flexicap funds that declined in a big way during the period include Samvardhana Motherson International, Lupin, Indraprastha Gas and Bharat Petroleum.
Seven out of nine schemes delivered positive returns. It seems over-diversification into stocks helped them to contain losses. Most of the multicap schemes held 70-120 stocks in their portfolios. As of May 2022, Nippon India Multi Cap and Sundaram Multi Cap Fund held 92 and 80 stocks, respectively, in their portfolio.
Seven out of nine schemes delivered positive returns. It seems over-diversification into stocks helped them to contain losses. Most of the multicap schemes held 70-120 stocks in their portfolios. As of May 2022, Nippon India Multi Cap and Sundaram Multi Cap Fund held 92 and 80 stocks, respectively, in their portfolio.
In the year to July 1, 2022, Nifty Smallcap 50 – TRI corrected 21 percent while Nifty Smallcap 100 - TRI and Nifty Smallcap 250 – TRI lost 11 percent and 4 percent, respectively. This explains why smallcap funds having diversified exposure across the smallcap universe (irrespective of market capitalisation) managed to cushion this fall well. Canara Robeco Small Cap Fund (CSF) topped the chart. Stocks such as VRL Logistics, KPR Mill, Schaeffler India and Mahindra Lifespace Developers helped CSF deliver better returns.
In the year to July 1, 2022, Nifty Smallcap 50 – TRI corrected 21 percent while Nifty Smallcap 100 - TRI and Nifty Smallcap 250 – TRI lost 11 percent and 4 percent, respectively. This explains why smallcap funds having diversified exposure across the smallcap universe (irrespective of market capitalisation) managed to cushion this fall well. Canara Robeco Small Cap Fund (CSF) topped the chart. Stocks such as VRL Logistics, KPR Mill, Schaeffler India and Mahindra Lifespace Developers helped CSF deliver better returns.
The aggressive hybrid funds category that held a static equity allocation of 65-80 percent failed to handle the market well as two-thirds of the schemes in the category delivered negative returns. Their debt allocation too failed to bear fruit. However, some like ICICI Pru Equity & Debt and Quant Absolute Fund managed to cope with the market fall and delivered notable returns.
The aggressive hybrid funds category that held a static equity allocation of 65-80 percent failed to handle the market well as two-thirds of the schemes in the category delivered negative returns. Their debt allocation too failed to bear fruit. However, some like ICICI Pru Equity & Debt and Quant Absolute Fund managed to cope with the market fall and delivered notable returns.
Only half of the funds in the balanced advantage funds category managed to deliver positive returns in the last one year. Balanced advantage funds are go-anywhere schemes having flexibility to maintain a dynamic allocation between debt and equity. However, most of them maintain at least 65 percent in equity to enjoy equity taxation. Each scheme under this category follows a different in-house approach to invest in equity. HDFC Balanced Advantage, Bank of India Balanced Advantage and ICICI Pru Balanced Advantage Fund were the top three performers in the last one year.
Only half of the funds in the balanced advantage funds category managed to deliver positive returns in the last one year. Balanced advantage funds are go-anywhere schemes having flexibility to maintain a dynamic allocation between debt and equity. However, most of them maintain at least 65 percent in equity to enjoy equity taxation. Each scheme under this category follows a different in-house approach to invest in equity. HDFC Balanced Advantage, Bank of India Balanced Advantage and ICICI Pru Balanced Advantage Fund were the top three performers in the last one year.
Dhuraivel Gunasekaran
Sections
ISO 27001 - BSI Assurance Mark