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Business News/ Money / Personal Finance/  58% large cap funds fail to beat underlying indices during the initial half of 2023
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58% large cap funds fail to beat underlying indices during the initial half of 2023

The SPIVA® India Scorecard for the first half of 2023 reveals persistently elevated underperformance rates among Indian equity and bond mutual funds over three- and five-year intervals.

1H 2023 SPIVA® India Scorecard shows Indian equity and bond markets underperforming over three and five years.Premium
1H 2023 SPIVA® India Scorecard shows Indian equity and bond markets underperforming over three and five years.

On October 10, 2023, the foremost index provider, S&P Dow Jones Indices (S&P DJI), unveiled the outcomes of its S&P Indices versus Active Funds (SPIVA®) India Scorecard for the initial half of 2023.

The SPIVA Scorecard highlights the diverse performance of active managers in India across various fund categories during the initial half of 2023. The majority of Indian equity large-cap funds struggled to surpass their benchmark, as 58 per cent of actively managed funds fell short of outperforming the S&P BSE 100.

Within the fixed-income fund category, even though the S&P BSE India Government Bond Index saw a 4.7 per cent increase in the first half of 2023, less than one-sixth of active bond fund managers managed to outperform the benchmark during this timeframe, resulting in an underperformance rate of 85.2 per cent. Nevertheless, as the investment horizon extended, a smaller proportion of funds failed to meet expectations, with underperformance rates decreasing to 75 per cent and 66.7 per cent over three- and five-year periods, respectively.

Benedek Voros, Director, Index Investment Strategy, S&P Dow Jones Indices said, “In the early months of 2023, the Indian stock market saw some notable gains across various market capitalization segments as measured in local currency. For example, the S&P BSE 400 MidSmallCap Index the benchmark for Indian Equity Mid-/Small-Cap funds, not only surpassed the total returns of the S&P BSE 200 but also posted higher returns than the S&P BSE 100 by an impressive margin of more than five per cent."

Furthermore, as the S&P BSE 400 MidSmallCap Index experienced a 12.4 per cent growth in the initial half of 2023, 45.3 per cent of active managers failed to surpass the index during that period. Notably, among all the fund categories assessed in the SPIVA India Scorecard, Indian Equity Mid-/Small-Cap funds demonstrated the strongest performance over a 5-year timeframe, with just 38.1 per cent of funds falling short of outperforming the S&P BSE 400 MidSmallCap Index.

In different categories, the S&P BSE India Bond Index achieved a 4.6 per cent increase in the first half of 2023. However, when it comes to Indian Composite Bond fund managers, their underperformance rates were the most pronounced among all the categories in the SPIVA India Scorecard, reaching a high of 95.7 per cent.

Among all categories, the Indian Composite Bond funds displayed the least resilient survival rates over one, three, and five years, with a fifth of the funds in this category having either ceased operations or merged in the last five years. As is often observed on SPIVA Scorecards covering various regions and fund categories, the underperformance rates tended to increase as the duration of measurement extended.

The SPIVA Scorecard provides insights into the performance of active managers in India across various fund categories for the first half of 2023. Notably, a significant portion of Indian equity large-cap funds fell short of their benchmarks, with 58 per cent of actively managed funds failing to outperform the S&P BSE 100.

Key highlights from this year's report include:

  • Among the fund categories featured in the SPIVA India Scorecard, Indian equity mid-/small-cap funds excelled over a five-year period, with only 38.1 per cent of these funds underperforming the S&P BSE 400 MidSmallCap Index.
  • Although the S&P BSE India Bond Index saw a 4.6 per cent increase in the first half of 2023, the underperformance rates for Indian Composite Bond fund managers were the highest across all categories in the SPIVA India Scorecard, reaching 95.7 per cent.
  • In the fixed-income fund category, despite a 4.7 per cent rise in the S&P BSE India Government Bond Index during the first half of 2023, fewer than one-sixth of active bond fund managers managed to outperform the benchmark, resulting in an 85.2 per cent underperformance rate.
  • The S&P BSE 400 MidSmallCap Index experienced a 12.4 per cent increase in the first half of 2023, yet 45.3 per cent of active managers underperformed the index during that period.
  • Notably, Indian Composite Bond funds displayed the lowest survival rates across all categories over one, three, and five years, with a fifth of the funds in this category having either closed or merged over the past five years.

 

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Published: 11 Oct 2023, 04:15 PM IST
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